Commercial Property Insurance
If your business building and property are damaged by storm, fire, or other event covered by the policy, commercial property insurance pays to repair or replace the damaged property. If you business is unable to operate as usual, the policy can also pay some of your lost income.
There are three levels of commercial property insurance coverage, with each protecting against different causes of loss or damage.
Basic form policies provide the least coverage. They usually cover damage caused by windstorms, hail, lightning, fire, smoke, aircraft and vehicle collisions, explosions, vandalism, sprinkler leakage, riots and civil commotion, volcanoes, and sinkholes.
Broad form policies most often cover the causes of loss that are included in the basic form, as well as damage from structural collapse, leaking appliances, the weight of snow, sleet or ice, and falling objects.
Special form policies provide the most coverage. Special form policies usually cover damage from all causes of loss, except for those that are specifically listed in the policy - the policy exclusions. Most commercial property policies exclude damages due to floods, war, earth movement, nuclear disaster, insects or vermin, and wear and tear.
Actual Cash Value Coverage vs. Replacement Cost
Commercial property policies provide either actual cash value coverage, or replacement cost coverage, or some combination of the two. So that your business is fully protected, make sure your policy provides replacement cost coverage.
Replacement cost coverage pays to replace or your property at current market costs. In other words, the policy will pay enough to replace your property and rebuild your building with new items, even if the replacement cost is more than the amount you originally paid.
Actual cash value coverage pays replacement costs, minus depreciation. Depreciation is the decrease in value because of wear and tear or age. The policy might not pay enough to fully rebuild your business if you have actual cash value coverage.