Commercial Property Insurance Guide for Choosing the Right Policy

With the commercial property insurance, a commercial property gets protection in terms of compensation from many unwanted happenings, such as theft, fire, and natural disasters. 

A lot of business organizations, including manufacturers, retailers, non-profit institutions, and service-oriented enterprises get covered with this type of insurance. Commercial property insurance even covers ranches or farms.

When these properties suffer from a theft or get damaged by fire or storm, they are compensated by the insurance to replace or repair them. Commercial Insurance Houston TX policies also pay for the replacement of a lost or stolen property.

Types of Commercial Property Policies

In Texas, commercial properties are divided into three categories as mentioned below:

1.      Basic form policies: The common perils are covered in these policies. For example, storms and fires.

2.      Broad form policies: In these policies, common perils as well as other damages caused by structural collapse, water, sprinkle leakage, the weight of snow, sleet and ice are covered.

3.      Special form policies: These policies cover all kinds of perils except the ones specifically excluded in the policy. The exclusions commonly include harms from earth movement, flood, terrorism, war, wear and tear, nuclear disaster, and insects.

Prior to buying a policy, study it carefully. You may require buying separate policies or additional coverage, like a windstorm, crime coverage, or a flood policy to completely protect your enterprise.

If you are operating a business in more than one location, you can get it completely covered by a single policy unless the business at different locations has different risk profiles and functions. 

For example, some businesses have a factory at one location and the administrative office at another. In such cases, the agent can clarify whether a single policy will cover it or separate policies will be required.

Note: In the Texas coastal counties, damages from a windstorm are not covered in most of the commercial property policies available. For example, the Harris County’s parts in Galveston Bay and 14 other coastal counties are excluded. So, businesses situated in these counties will require a separate policy to cover a windstorm.

In case you lease or rent a building, your property in the building won’t be covered in the building owner’s policy. A tenant coverage should be bought separately to insure the furniture, machinery, and merchandise. The cost of tenant coverage is usually less than the coverage of a building because in this policy, only the building’s contents are covered instead of the whole building.

Commercial Property Coverages

Some insurance professionals say the policies for commercial property lack standardization. There are certain minimum requirements by the state that insurance companies should meet, but they can further develop or modify the policies on their own. Thus, the terms of policy and coverage may vary from one insurance provider to another.

CMP (Commercial Multi-Peril): Multiple coverages are incorporated in these policies so that the property gets complete protection from a single policy. This may cover commercial property, commercial auto, inland marine, and liability. In comparison to buying individual coverages, it costs less to buy a CMP policy.

BOP (Business Owner Program): These are the common commercial policies for small businesses. Businesses that have adopted these policies get the liability and property covered in a single property.

A variety of unwanted happenings are covered in commercial property policies and they are either the base property’s part or one can avail them by endorsing different coverages. While endorsing or expanding the coverages of a policy, the premium usually increases. Moreover, the coverages can be bought as individual standalone policies.

Common coverages: There are certain risks that almost all the commercial property insurance policies in Texas cover, including buildings not owned but regularly used, newly constructed or acquired buildings, personal properties of employees, off-premises, business interruption, extra expenses, valuable papers, law or ordinance, machinery and boiler, and inland marine.

Crime coverage: As different types of criminal activities can harm the property, there are different policies to give businesses protection from crimes. Some common crime coverages include safe burglary and robbery, loss of money and glass because of theft, alteration or forgery, and disappearance or destruction of important assets in the commercial property.

When a Texas commercial insurance policy pays for the losses due to a crime, it pays on the basis of the discovery or the loss sustained. In the discovery coverage, you are covered upon discovery losses and in the loss sustained coverage, you are paid for losses incurred during the duration of the policy.

Flood Coverage: Some insurance companies cover the risk of flood in their commercial property coverage. But it is usually available in the areas with less risk of flood. However, NFIP (National Flood Insurance Program) is the one that offers the flood insurance.

Qualification for NFIP coverage requires the business to be located within the NFIP engaging community. To minimize flood damage, these communities have adopted floodplain management and federal building programs. Communities with a high risk of flooding fall under NFIP and NFIP wants every structure in these areas to have the flood insurance.

Hail and Windstorm Coverage: In the coastal areas of Texas, insurance companies usually do not cover damages from a hail or a windstorm in their commercial property policies. If your business exists in certain areas of Harris County or 14 coastal counties of Texas, you should avail the windstorm coverage by TWIA (the Texas Windstorm Insurance Association).

This is available for all the properties made, remodeled, or repaired prior to 1^st January, 1988. However, the commercial developments after this date need to be inspected.

Understanding Commercial Property Rates   

To understand the rates, you should know that a process called underwriting is followed by the insurance companies. It usually determines the likability of your business to file an insurance claim. The premium rates are directly proportional to your claim’s likelihood. If the likelihood is more, the premium will be more. If it is found by any Houston commercial insurance company that your enterprise is on the higher risk for loss, it may deny issuing a policy.

The rates of commercial property insurance are usually determined by the primary factor, fire risk. The underwriting process by insurance companies includes inspection of a commercial property for possible hazards. The fire rating of a business property is determined by five factors of a standard rating system used by fire inspectors. These factors are the quality of construction materials, location of the property, whether the property is occupied or not, protective measures to prevent fire, and exposure to external fire dangers.

Shopping for Commercial Property Insurance

When it comes to buying a CIP, you should consider certain things which may affect your buying decision.

Prior to applying for a commercial property insurance coverage, you should get rid of all the possible hazards that can increase the chances of an insurance claim. Your insurance company or agent will guide you in eliminating the hazards.

While shopping, get quotes from different companies. Remember that a cheaper policy may cover fewer risks. Some insurance companies may deny giving you the commercial property insurance because every company has different underwriting criteria. However, you should not stop searching for the best one for you if you are denied.

Another factor to consider is the “higher deductibles.” When an insurance company pays you for a claim, you are charged a cost for the claim. Here, more deductibles mean less premium. Sometimes it happens that you end up paying more from your pocket during a claim. 

Further, look if your policy has a limit which means a specific amount being fixed up to which the insurance company will pay. Last but not least, do not forget to check the licenses of your insurance company and agent.