Do You Need Commercial Property Insurance Coverage? Find Out Here

Do you own a commercial property or are you running your business from a rental or leased property? In both cases, do you actually need commercial property insurance coverage? Most businesses encounter these questions. Many businesses prefer not to own the space from where they operate. They rather choose to lease that space from another company or individual. Therefore, in Adelaide, there are large buildings which have multiple tenants or are occupied with a single company, however, on rent or lease. If the property does not belong to you, do you still need commercial property insurance? The answer may vary. Find out everything about commercial property insurance coverage that will help you make the right decision.

What it covers?

Commercial property insurance is a type of business insurance. It compensates for the losses incurred due to damage to the commercial structure. It helps in protecting other assets of the company along with its structure and contents. If you are owning a commercial property, you must have commercial property insurance Adelaide to cover the risks of property damage. It protects the entire structure, parking lot, signage and other components that are attached to the structure.

Confusion arises when the property is on lease. Should the owner pay for the insurance or the tenant? The general trend is tenants obtaining their own commercial property insurance. It covers:

–  The portion of the building occupied by the tenant. Structural walls and fixtures within that area are covered in the insurance.

–  Company’s inventory

–  Company’s assets like furnishings, desks, chairs, appliances etc.

–  Computer or other such equipment

Does the tenant need it?

It is recommended that tenants take their personal commercial property insurance to reduce the risk of loss. The main reason behind this is that leased properties do not cover the actual structure. It is the property owner’s responsibility to have the entire structure covered under commercial insurance. However, this does not protect the tenant from the losses. Insurance taken by the property owner aims at protecting the owner’s property and equipment, not the tenants. So, if you are a tenant and the structure from which you are working is covered under insurance, your assets inside that property are still not protected from risks like theft, fires, weather events or accidents. Having your own insurance is the wisest option here.

Before taking a new place on rent or lease, you should discuss with the owner what type of commercial property insurance he has. Try to understand whether it will safeguard your assets or not as a tenant. Life is full of uncertainties and that is why you need to have protection against risks like a fire, storm, vandalism, theft, accidents etc. Make commercial property insurance an integral part of the business risk management strategy.

What if I am working from a residence?

If you are operating your business from a residential property, you will still have to purchase commercial property insurance. Residential properties are covered under a homeowner’s insurance policy. So, if the equipment is lost or damaged, the insurance cover will not compensate for it. If you do not wish to buy two insurances separately, you can opt for general liability insurance.

Know this before choosing a commercial property insurance coverage:

A.   Choose between cash value and replacement value:

At the time of buying the policy, policyholders are generally offered two options. In the case of stolen or damaged items, do they want cash value or replacement value? Cash value has cheaper premiums but it is not a wise option for small businesses. The cash value will compensate for the current worth of the damaged equipment. The equipment depreciates from time to time. So, if you wish to purchase a new item, you might have to add a huge amount. On the other hand, replacement value comes with a higher premium but it ensures that if you replace the damaged property with a brand-new item, the entire cost for replacement is paid by the insurance company. Businesses such as IT companies that thrive on state-of-the-art equipment should opt for replacement value only.

B.    Rental vs. owned property insurance:

Property owners can take an insurance policy that covers only items owned by them. If you are renting out a property as well as your equipment, you may need to choose insurance policy accordingly. If you are a property owner, you can purchase a comprehensive policy that covers everything from the actual building structure to the systems installed in it.

C.    Customize the commercial property insurance:

Several businesses require customized commercial property insurance to cover the loss in unfavourable situations. There are two ways to do this: Schedules and riders. In the schedule option, specific pieces of equipment that are named in the policy are covered. For example, if you have rented an expensive item to a tenant, you can add it to schedule. Riders help you cover events that are excluded in typical commercial property insurance.

D.   Insurance cover for business vehicles:

For many companies, automobiles are their most valuable assets. It is advisable to take commercial property insurance rather than personal car insurance. Commercial insurance also covers medical expenses that occur from accidents while driving for work.

Commercial insurance is essential to ensure that your livelihood is not impacted in case of an unfavourable situation. You can opt for personalized commercial property insurance coverage as per your requirement after understanding its nitty-gritty.