4 Types of Property Insurance for Business Owners (Pros & Cons)

Property insurance coverage, sometimes also called lessors risk, is the replacement cost for buildings, covering losses resulting from fire, vandalism, explosion, some natural disasters, and water damage. Some policies cover the building while more comprehensive policies cover contents such as computers, furniture, supplies and inventory.

Property insurance and lessors risk pays for repairs of building damage (whether leased or owned) ,for construction and affixed items including furnaces, electrical, and plumbing. It also covers costs of damage or loss of all items not affixed to the property and held within or on the premises, such as furniture, inventory, and supplies.

Property insurance for business owners can also protect items held under the business’ care, custody, or control. It also replaces or repairs signs and marquees, whether affixed to the building or free – standing, due to damage or loss from wind damage, vandalism, theft, or fire.

Lessors risk insurance policies cover the structure and contents and add other necessary coverage like general liability into one policy. However, property insurance on its own does not cover general liability.

It sometimes only covers a landlord’s building, while business property insurance covers any contents or fixtures. Business property insurance covers the contents and assets. While there are riders to cover signs, contents, and customers’ belongings, these are additions to strict commercial property and lessors risk insurance policies.

General liability, workers’ compensation, and errors and omissions are also not standard parts of commercial property coverage. Howbeit, small business insurance policies that cover these other liabilities are often combined in a business owner’s policy (BOP), which more or less help small business owners save money on commercial property insurance premiums.

Note that most business owners in the United States can expect to get property insurance coverage for between $500 and $1,000 annually. Estimating property insurance cost is not easy especially since it varies significantly by state, building size, construction materials, and business use. Lessors risk policies can also be a cheaper way for business owners to insure business property and contents.

Also note that property insurance rates are based on the replacement cost of the building, the sum of contents, inventory, and supplies. Replacement cost is referred to as the cost to rebuild a structure that is totally lost, which is almost always different from the property’s fair market value.

4 Types of Property Insurance for Business Owners

Property insurance just it was stated above protects a business from financial losses caused by damage to its physical assets. It is a broad category that includes so many other parts. These parts include;

1. Direct Damage Insurance

Direct damage coverage is what normally comes to mind when a business owner thinks about property insurance. It mainly covers the cost of repairing or replacing physical property that has been damaged or destroyed by a covered cause of loss.

Note that most small businesses obtain direct damage coverage by purchasing a property policy or business owner’s policy (BOP). Both cover loss or damage to property owned by the business such as buildings, production machinery, office furniture, and stock.

Even though they don’t cover every risk, all – risk property policies are relatively broad as they cover loss or damage by any accidental cause that is not specifically excluded. Also note that standard all – risk policies don’t cover losses caused by catastrophic perils like flood and earthquake. Business owners are expected to acquire flood or earthquake coverage via an endorsement added to their property policy or by purchasing a separate flood or earthquake policy.

2. Crime Insurance

Property insurance in the United States also includes crime coverage. Although most policies cover losses caused by theft, they exclude thefts committed by employees. In addition, most policies exclude money and securities under the definition of “covered property.”

• Employee Theft Coverage. Protects businesses against the theft of money, securities, and other property by an employee.
• Money Orders and Counterfeit Paper Currency. Covers a loss that happens when a business accepts a money order issued (or purportedly issued) by a post office or express company. Also covers a loss a business incurs when it accepts counterfeit paper currency (U.S. or Canadian).
• Computer Fraud Coverage. Protects businesses against the theft of property, including money and securities, by a thief who uses a computer to transfer covered property from the insured’s premises or bank to another person or place.

3. Time Element Coverage

This is another popular type property insurance is time element insurance. The name “time element” comes from the fact that losses are tied to the period of time required to repair or replace damaged property. Losses are known to happen when property cannot be used because it has been damaged or destroyed.

The two most common types of time element insurance are business income and extra expenses coverage. These may be acquired individually under separate forms or in combination under a single form. Business income insurance covers income your business looses when your business premises are damaged by a covered peril and your business had to reduce or suspend its operations.

Extra expense insurance covers extra costs (meaning costs over and above your normal expenses) your business incurs to resume operating while property that has been damaged by a covered damage is replaced or repaired. However, another type of time element insurance is leasehold interest coverage. This one covers a financial loss you suffer as a tenant when your lease is cancelled due to direct damage to the leased premises by a covered peril.

4. Inland Marine Insurance

Property and BOP policies are meant to cover property situated at your premises. Howbeit, most afford little coverage for property located off – site. Construction companies, landscapers, cleaning companies, and many other businesses tend to Own and manage properties that they use away from their premises.

To insure their off – site property, businesses can acquire inland marine insurance. This insurance covers equipment, machinery, or other property that is transported over land. Meanwhile, it differs from ocean marine insurance, which covers ships and cargo travelling on the high seas.

Inland marine policies are often called floaters because they cover movable property. Have it in mind that most inland marine coverage can be added to a commercial property or package policy via a separate form or endorsement. Here are some examples:

• Fine Arts Floater. Covers loss or damage to statuary, paintings, carvings, and other valuable works of art owned by a business.
• Contractors Equipment Floater: Covers loss or damage to tools, machinery, or other mobile equipment owned or used by contractors.
• Electronic Data Processing (EDP) Coverage. Covers loss or damage to your computers, data, or storage media.
• Builders Risk Policy. Covers damage to a building that is under construction or renovation. Unlike most types of inland marine insurance, builders risk is written as a separate policy.
• Installation Floater. A type of builders risk insurance that covers property being installed by a contractor at a customer’s location.

Pros and Cons of Property Insurance 

Property insurance is indeed an absolute “must have” coverage to ensure business continuity and to protect the physical assets of your business from loss or damage, theft, fire, smoke, water and vandalism. Below are few pros and cons of acquiring property insurance in the United States.

Pros

• Protects the physical assets of a business that include property, equipment, inventory and supplies, office furniture and fixtures, computers, electronics, and personal & customer property kept at the business premises – whether the property is owned or on lease.
• It also covers fixtures attached to the property such as lighting systems, carpeting, windows, outdoor signboards, walls & fencing and landscaping.
• Property insurance also provides coverage against natural disasters such as fires, hurricanes, ice storms, earthquakes, tornadoes, flooding and the resulting water damages.
• For employees travelling on company related work in the same city or in any other state, commercial property insurance protects their tools and equipment as long as it is in a company owned vehicle.
• In case of an accident anywhere in the country, commercial property insurance gives a reassurance to business and property owners and enables them to stand up on their feet again.
• It offers protection of the earnings and assets of business owners, so that they their businesses do not get wiped off, but can grow back to the level at which they were operating.
• It provides succour and acts as a means of support especially to those owners of small businesses whose only source of income might have been lost, as a result of any physical damage to the property or business assets, or bay act of vandalism.

Cons

• Sometimes, business insurance may be too much of an extra hassle for you to take on. Some insurance companies are notoriously slow to respond to claims and unnecessarily picky about how claims are reported, and this means that even in the event of a disaster, it may take months of back and forth with your insurance company before you actually receive the much needed money.
• Business owners are constantly examining budgets and looking for ways to save money. Property insurance has proven to be expensive, especially in certain industries where accidents are common. Construction business policies are more expensive than policies for accounting offices.

Top 5 Companies That Offer Property Insurance in the United States

To get the right property insurance, you have to first ensure you understand the risks facing your business. Also, finding a policy that meets your exact property insurance needs is easy with the right insurance partner. Here are top property insurance providers in the United States.

1. Insurance321

Insurance321 is a renowned broker that helps small business owners obtain the rates and policy inclusions among top insurance carriers. Aside the fact that it saves time for the business owner, it also helps to make sure that the right carrier is paired to the right risk.

Insurance321 is the ideal choice for a small business owner who is looking to compare carriers to make sure the right one is selected and the best price is reached. In addition, since Insurance321 is not beholden to any one carrier, they offer objective advice for the best policies for business owners

2. The Hartford

This insurance provider remains one of the biggest carriers of commercial insurance in the United States, having served consumers and business owners for more than 200 years. It boasts of a wide appetite for business risk, which entails that it covers many industries and business sizes.

Lessors risk real estate policies are one of the top types of business insurance policies they write. This provider is an ideal choice for a business that wants property insurance as a standalone policy or as part of a business owner’s policy (BOP). In both cases, The Hartford offers coverage in competitively priced packages.

3. Hiscox

Hiscox is a well known growing small business carrier. Agreeably, Hiscox is a younger company, but they remain financially strong through smart underwriting risk selection. This provider is an ideal option for small residential unit and apartment building managers that need both structure and liability coverage. Hiscox understands that property managers may or may not require tenants to maintain renters insurance, and will help write the appropriate commercial property insurance.

4. Travelers Group

This company is a major commercial lines insurance carrier that often receives the highest ratings from insurance credit companies. Business owners who acquire insurance from Travelers Group benefit from a business partner seeking to help limit losses through safety and security programs offered for long – term savings.

Travelers Group is also an ideal choice for commercial real estate investors who have multiple properties. Although Travelers preference is for real estate portfolios capped at $50 million in market value, the company is able to underwrite larger classes of real estate with some additional underwriting.

5. Farmers

This provider too is a national brand for personal lines of insurance but also has a very strong reputation for commercial insurance for small business owners. The company maintains that education is the key to fewer losses for business owners. The University of Farmers helps business owners eradicate confusion so they can get the right policy for their specific needs.

This provider is ideal for homeowners associations (HOAs) that need a master policy for the various HOA – owned community structures and overall general liability. If you need coverage for a unit in a complex that already uses Farmers, you should consider Farmers so there are fewer gaps with fewer denied claims.

Conclusion

For a business owner, it is pertinent to consult an insurance broker or agent who has the ability to analyze the business and procure a property policy that suits that business’ specific needs. Have it in mind that property insurance is not one – size – fits – all, and it is critical to ensure that the coverage is tailored to the business’ specific risk profile. Also, it is important that the insurer is financially strong, and with an excellent reputation for claims service.