Commercial property insurance protects many aspects of a company. Some of the basic coverages are building, stock or inventory, work in progress, furniture and fixtures, electronic data processing equipment, business income, cargo and equipment breakdown. There are many complex components of property insurance. I am going to briefly discuss what an underwriter needs to offer property coverage, buildings or real property, business personal property and business interruption.
To begin an underwriter will want to know the condition of the structure containing your property and or being insured. The square footage of the structure, how old is it, when were the electrical and plumbing systems updated and does it have fire sprinklers or an alarm system. They need this information to determine how safe the structure is. They will also want to know how it is constructed. Is it a frame building or is it concrete tilt up? Underwriters want to know if the property is occupied or vacant and what the tenants do. For example, is it a medical office or a manufacturer of chemicals?
Real property or building insurance may include or exclude losses due to vandalism, earthquake, flood and theft to name a few. Normally the policy will cover the perils of fire, theft, vandalism, disappearance and the sort. Not that your building will disappear or be stolen but components maybe. Copper wiring and piping theft was high during the recession. Earthquake and flood coverage is often picked up on a standalone policy. The perils covered also vary depending on the condition of the building.
Examples of business personal property include furniture and fixtures, machinery and equipment and stock or inventory. Essentially the things you need to run your business. Electronic data processing equipment, software, data and employee’s tools may be included. Cargo and mobile equipment are not covered on this policy.
Business interruption provides coverage in the event a company cannot operate due to a covered peril. The peril could be fire, vandalism, water damage along with numerous others. This policy should also respond to an interruption in your utilities. We recommend completing a business interruption worksheet to make sure the limit for this coverage is correct. In addition to lost revenue, business interruption can cover payroll, health insurance premiums, rent or lost rents along with many ongoing expenses. This coverage is very important and not having it correctly insured has led to many companies to shut down for good.
Property insurance is one of the more complex types of coverage. I will address some of the other areas of property coverage in upcoming blogs. The insurance geek in me loves property insurance. Remember that insurance is simply a snapshot of where your company and exposures are at a point in time. If you are in a growth mode you should meet with your agent on a regular basis.
I would love to hear your thoughts and welcome your comments.