What is 'Commercial Property Insurance'

Commercial property insurance is used to cover any type of commercial property. Commercial property insurance protects commercial property from such perils as fire, theft and natural disaster. This type of insurance is carried by a variety of businesses, including manufacturers, retailers, service-oriented businesses and not-for-profit organizations.

BREAKING DOWN 'Commercial Property Insurance'

Commercial property insurance can be a major expense for businesses that use equipment worth millions or billions of dollars, such as railroads and manufacturers. This insurance essentially provides the same kind of protection as property insurance for consumers. However, businesses can usually deduct the cost of commercial property insurance premiums as expenses.

Costs of Commercial Property Insurance

When determining how much a company should pay for commercial property insurance, the value of a business' assets, including the building, is the primary factor. Before meeting with an agent to discuss coverage, a business should take an inventory of their physical assets located at their property. This information will help determine what exactly would be worth insuring and what the replacement value should be.

Factors Considered in a Commercial Property Insurance

  • Location: Buildings in cities or towns with good fire protection typically cost less to insure than buildings outside a city or in areas with limited fire protection.
  • Construction: Buildings made of potentially combustible materials will have higher premiums, while those made of fire-resistant materials could earn a discount. Additions to an existing structure might affect a fire rating, so it's a good idea to talk to an agent or insurance company before remodeling. Internal structural elements can also affect a fire rating. Using wood partitions, floors, and stairways in an otherwise fire-resistant building will likely nullify any rate reduction. Fire-resistant interior walls, floors, and doors can help maintain a good fire rating.
  • Occupancy: A building's use also affects its fire rating. An office building will likely rate better than a restaurant or auto repair shop. In a building with multiple tenants, one hazardous occupant will negatively affect the fire rating of the entire building. If a business is in a building with a more hazardous tenant, premiums will be higher.
  • Fire and theft protection: How far is the nearest fire hydrant and fire station? Does the business have a fire alarm and/or sprinkler system? How about a security system?
  • Property to Consider for Commercial Property Insurance

  • The building that houses your business, whether it's rented or owned
  • All office equipment, including computers, phone systems and furniture, whether they’re owned or leased
  • Accounting records and important company documents
  • Manufacturing or processing equipment
  • Inventory kept in stock
  • Fence and landscaping
  • Signs and satellite dishes

 

    RELATED TERMS
    1. Fire Insurance

      Fire insurance is property insurance covering damage and losses ...
    2. Commercial Lines Insurance

      Commercial lines insurance helps keep the economy running smoothly ...
    3. Construction Occupancy Protection ...

      COPE (Construction Occupancy Protection and Exposure) is a set ...
    4. Building And Personal Property ...

      A building and personal property coverage form is a type of business ...
    5. Total Insurable Value

      Total insurable value (TIV) is the value of property, inventory, ...
    6. Business Insurance

      Business insurance coverage protects businesses from losses due ...
    Related Articles
    1. Insurance

      Do You Need Casualty Insurance?

      Find out how different types of coverages can protect you and which policy is right for you.
    2. Insurance

      Homeowner's Insurance Guide: A Beginner's Overview

      Everything new homeowners need to know about homeowner's insurance to protect their residence.
    3. Insurance

      How To Invest In Insurance Companies

      Knowing the special circumstances that insurance companies operate under helps in evaluating whether or not a listed insurance company is a good investment and whether the economic environment ...
    4. Investing

      What You Should Know About Real Estate Valuation

      Accurate real estate valuation is important to mortgage lenders, investors, insurers, and buyers and sellers of real property.
    5. Insurance

      How Are Home Insurance Rates Determined?

      You home's value is one of the driving forces behind your home insurance premium and the amount of coverage you receive.
    6. Insurance

      12 Car Insurance Cost-Cutters

      Car insurance rates are on the rise. If car insurance costs are dragging you down, use these tips to free yourself from some of the extra weight.
    7. Insurance

      How to Decide if Title Insurance Is Worth the Cost

      Most people don't understand the critical role title insurance plays when buying a home.
    8. Insurance

      Bundle Your Insurance for Big Savings

      Bundling your insurance can save you money and time. Read on to see how to get the most out of multi-line insurance discounts.
    9. Investing

      How rental property depreciation works

      Rental property can prove to be a great investment. It's a bit tricky, but rental property depreciation can be a valuable tool to make your investment pay off.
    10. Insurance

      The 5 Biggest Chinese Insurance Companies

      Read about the top Chinese insurance companies by market capitalization, and learn a little about their positions in the marketplace.
    Hot Definitions
    1. Investment Advisor

      An investment advisor is any person or group that makes investment recommendations or conducts securities analysis in return ...
    2. Gross Margin

      A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
    3. Inflation

      Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
    4. Discount Rate

      Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
    5. Economies of Scale

      Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
    6. Quick Ratio

      The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
    Trading Center