Commercial Property Coverage and Some Helpful Loss Mitigation Tips

Commercial Property Insurance coverage protects your owned Property, or facility where you conduct business, and everything you own within. Most property insurance policies will cover you on a replacement cost basis for your contents in the building (ie: office furniture, computers, inventory,locks/boxes/storage/packing materials, equipment) at a stated limit of coverage. Replacement cost coverage is the preferred coverage basis, as it does not factor in Depreciation over time to these owned items.

Should there be a claim, the policy would reimburse for the cost to replace the items and/or building at today’s cost. Some additional coverages to be sure you have listed on the Property portion of your policy are Equipment Breakdown and Utility Services coverage. Equipment Breakdown is essential especially if your facility has a climate control and/or sprinkler system, and boiler. This coverage line is designed to protect you against damages resulting from the electrical or mechanical breakdown of owned systems or equipment. Utility services is important to have especially if your facility is located in a severe weather region. And even so, there are limitations to the incidences in which insurance policies will pay for loss to being out due to a power outage. For this reason, it is vital to be sure you have coverage afforded for off premises power failure.  

In addition to tangible property being covered under the Property portion of your policy, it is important to be sure your Business Income/Business Interruption insurance limits are sufficient.  If you have this coverage listed on your policy as ‘ALS’ (Actual Loss Sustained), then you have the most comprehensive Business Income coverage, as it is not based on an established limit, but is designed to indemnify you for the actual lost revenue you are out, due to the claim.  The Business Income coverage typically has a maximum time frame such as 12 months, and also has a set time deductible, such as 72 hours- where it would kick in after that period of time. This coverage is important to have in place at a sufficient limit in accordance with your gross revenues, so that you would be covered for the cost to relocate an office to keep open for business as usual, as well as employee remuneration and receive reimbursement for lost revenues during the period of being inoperable.  

Identifying potential hazards before a loss occurs is key.  Let’s take a look at some of the most common causes for property/building damage claims, and how to prevent them…

• Electrical Fires:  Perform facility wiring inspections seasonally.  Keep a watchful eye out for any wear and tear, especially by animals that could have entered.  Have an electrician do a walk-through of each building during normal business hours to be sure all is satisfactory at normal usage levels for your facility.  Fire Safety equipment should be on a regular inspection service agreement, and Fire alarms should be connected to a central station and battery backed-up. Before day’s end, unplug any office appliances that are unnecessary to leave plugged overnight.
• Burglary/Theft/Vandalism:  Recommended practices for mitigation of these types of property claims situations (in addition to arson) is:  fully fencing your facility, and installing a comprehensive surveillance system in all key corners of property, parking areas, entrance areas and beyond- with sufficient lighting.  Displaying advisory signs of the surveillance system will deter trespassers, and it is vital to maintain a Central Station Burglar alarm contract, so that the authorities are notified immediately once there has been a breach in security.
• Wind and Hail Damage:  Mother Nature sure is a force to be reckoned with, and we cannot stop her if we try; however making sure your roof is highest level impact resistant and coated, so that damage from even the largest golf-ball size hail is minimum or none, is highly recommended.  Have a certified roofing contractor come out and give an analysis of the best design for your facility if you are in a hail-prone zone. If you are in an area where high winds are common or if you are coastal, be aware of any areas of lifting on your roof surfacing so that you can proactively repair before a storm potentially tears a greater portion of roof up.  On the property, trim back any overhanging limbs and scope the land for any dead trees that could easily come down and cause damage to your building or glass.

What to do when Property damage occurs/when you receive notice of a property damage related incident?  Report the details of the occurrence to your insurance agent and carrier immediately (take clear pictures of the damaged property), and keep your agent in the loop through the process.  The sooner you report, the quicker an adjuster can get assigned, and settlements can be made to reimburse you for the damages, and make you whole again.