Obtaining insurance for a business property should not be taken lightly. A lot can be at stake when starting a business, but ensuring that its physical location is protected from damage or destruction should be of utmost importance. Unsurprisingly, this can bring about many questions for policyholders. Examining the most common questions to ask when insuring a commercial property can help business owners have the knowledge to confidently protect their property.
Common Questions to Ask When Insuring a Commercial Property
A business will inevitably run into several challenges during its time in operation. When issues involving property damage occur, owners must have the proper insurance coverage in place to avoid having to pay for the damage out of pocket. Some, if not most, businesses don’t have extra money lying around to handle these often expensive costs, making comprehensive commercial property insurance coverage important to have.
Commercial property insurance works to cover a business’s buildings, contents, and other unattached fixtures in the event of property damage due to severe weather, natural disasters, fire, theft, and vandalism. However, it can sometimes be difficult for busy business owners to know whether or not they have the right coverage if there are any gaps in coverage, and even how much they may need to pay for coverage. Because of this, it’s imperative to know the right questions to ask insurers to ensure there is no confusion when it comes to coverage.
Some important questions to ask when insuring a commercial property include:
How Much Should Coverage Cost?
Because the budget of a business is often crucial for its survival, one of the questions often asked when obtaining commercial property insurance is how much coverage should cost. Generally, the cost of a commercial policy depends on certain specifics like the location of the business, the nature of the business, and more.
Most insurers will want to know what the primary use of the property will be to assess the potential risks of damage. For instance, if a business is a restaurant, it could have a higher risk of damage due to fire than an office space would. In addition, the general location of the business will affect coverage costs. If the property is in Galveston, Texas as opposed to San Antonio, Texas, for instance, it will likely cost more to insure due to the proximity to water and the likelihood of a hurricane and/or flood. Location can also pertain to how close the business is to emergency services. A property that is closer to a fire station, for example, may be less costly to insure than one that is many miles away from any emergency services.
What Coverage Exclusions Should I Look Out For?
Business owners can be at a great disadvantage if they find they have a gap or several gaps in coverage. This can make them incredibly vulnerable to having to cover the cost of damage out of pocket. Not only that, but it can be very difficult for even experienced business owners to know they have gaps in coverage due to how nuanced and complex policy language can be.
Insureds should take the time to thoroughly review their policies with trusted legal counsel to ensure no gaps in coverage are present. Some of the most common areas wherein commercial policyholders may find they have coverage gaps can include damage due to a flood, earthquake, or windstorm. Policyholders should also look to see whether their policies have an arbitration provision as well as any roof and cosmetic damage endorsements.
What is a Coinsurance Provision?
Some policyholders may be unaware their policy contains a coinsurance provision. Coinsurance refers to the process of splitting and spreading the amount of risk across multiple parties. In commercial property insurance, this applies to damage to both the property and contents coverage after a covered event occurs. Coinsurance essentially works to ensure policyholders have insured their business for an appropriate value and that insurers receive fair premiums in exchange for the risk.
To calculate coinsurance costs, the insured would begin by dividing the actual amount of coverage on the property by the amount that should be carried, which is normally 80%, 90%, or 100% of the property value. Following this, the insured will then multiply that amount by the loss figure to determine the total reimbursement. In the event the reimbursement value is greater than the specified policy limits, a secondary coinsurer can supply the remaining funds.
Do I Still Need Coverage if I Rent My Property?
Even if a commercial property is being rented from a landlord, it is still very important for a tenant to obtain commercial property coverage. Most landlords will not enter into a lease agreement until proof of insurance is acquired and provided. This helps ensure the landlord’s property will be protected from property damage and other liability concerns.
Depending on the situation, a landlord will likely require the business owner to show proof of both liability and property insurance. In addition, if the business gets significant auto traffic or has company-owned vehicles, the landlord may also require proof of commercial auto insurance.
Insurance Coverage Attorneys
While it may seem like a time-consuming process, taking the time to ask the proper questions about a commercial property insurance policy can help policyholders better understand their coverage. No matter an insured’s knowledge of their policy, however, their insurance company can still choose to underpay, delay, or deny a valid claim.
The insurance coverage attorneys at Raizner Slania are incredibly knowledgeable regarding the claims process and have represented thousands of clients against major insurance providers in commercial property damage disputes. If you need assistance with a commercial claim, we can help. Contact our office today for more information.
