Overview

Commercial property insurance protects businesses against damage to their buildings and contents. In the event of damage caused by fire or storm, for example, commercial property insurance can help repair or replace the buildings, inventory, equipment, machinery, and other business property affected.

Commercial property owners, both those operating a business on their property and those leasing property to another entity, can purchase policies that protect the building and associated structures. A property owner's policy, however, will not protect tenants from loss. Business owners who lease their property may buy policies that protect the building's contents, such as machinery, furniture and stored or displayed merchandise.

Coverage
Property insurance may be purchased on the basis of the property's actual value (the replacement cost minus depreciation), its replacement value (the cost of replacing an item without deducting for depreciation), or on an agreed-upon amount (commonly used for art objects and other unique items).

You should take a complete inventory of all your business property, determine its value and decide what's worth insuring. Make sure the items you want to cover are provided for in the basic policy; if not, buy more coverage.

Named-peril policies cover certain losses resulting only from those perils that the policy names; all-risk policies offer coverage for all perils except those specifically named in the policy. An all-risk policy is usually sufficient for the average small business, but all businesses and their insurance needs are different.

Reducing Your Risks
Insurance companies evaluate potential policyholders in terms of the risk of loss they pose. Businesses that appear to be relatively high risks generally pay more for insurance coverage, and might have trouble obtaining coverage from some companies.

Some elements of risk are difficult to control, other risks are easier. A business property with neat, orderly grounds is much less at risk of fire than one with debris piled next to buildings. In fact, risk of loss from fire is one of the main factors determining the cost of commercial property insurance. Building or leasing a fire-resistant building should lower a business's insurance premiums dramatically.