What is Commercial Property Insurance and What Does It Cover?

By: Updated: January 11, 2022

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Any business or organization that owns or leases commercial property should have insurance. This will protect you in the event of fire, crime and vandalism. In addition, there is a wide variety of insurance options to cover other situations.

 

What is commercial property insurance?

Commercial premises insurance is similar to your home insurance. You pay a monthly or annual premium and the insurance company will send you a cheque if there is a covered claim.

 

What does commercial property insurance cover?

First of all, let’s look at whether you lease or own commercial space:

  • Own: If you are the property owner, you will need insurance to cover the building in the event of a fire or another incident.
  • Lease: If you rent the space, the landlord likely has insurance for the building itself. However, you still need insurance to protect your business

Commercial premises insurance will include many of the key elements that you need to keep your business up and running. This may be computers, manufacturing equipment, tools and office furniture. Perhaps you store inventory in the building while you wait for it to be shipped to customers. On the outside of the building, you may have signs, fencing and landscaping. These should all be insured.

 

What are the different types of commercial property insurance?

In addition to the basic elements that we have included above, commercial premises insurance can include some important add-ons. You can choose those that are applicable to your business and decide whether you want to pay the cost of covering these risks.

These include:

  • Mobile property: Protects equipment and inventory while it is in transit or at job sites
  • Equipment breakdown: Your production machinery may break down, causing an interruption in your ability to manufacture goods. Or you may be in the food sector and your refrigeration goes on the fritz, spoiling your inventory.
  • Business interruption: While commercial property insurance helps you to replace your building, equipment and inventory, your business may be out of operation and taking a financial hit. Business interruption insurance helps you to get the company back on its feet. Depending on the policy, coverage may begin at the time of loss and continue until you are able to reopen. It also may cover employee overtime to resolve problems and the cost of moving to a temporary site, if that’s necessary.
  • Earthquake or flood insurance: Some parts of Canada are more vulnerable to these types of natural disasters. If your business is in an area with higher risk, you may want to consider this option.
  • Sewer backup: This can cause serious damage to your equipment and inventory. It can also halt production if your workplace is unsafe or too unpleasant to work in.

 

How much does commercial property insurance cost?

It’s a great idea to meet with a commercial insurance broker to discuss the types of insurance you need for your particular business. They will be able to give you price quotes from insurance companies.

Some of the factors that have an impact on the cost include:

  • Lease or own: If you own the building, you will need to insure it for its replacement value if there is a fire. If you are simply leasing, your landlord should take care of the insurance for the building itself. Of course, the size of your building and operation will have an impact on cost.
  • Inventory and equipment: If you have a lot of expensive manufacturing equipment and a huge warehouse full of valuable goods, you will need more insurance. In manufacturing, it is sometimes called industrial building insurance. On the other hand, a small office with some furniture and computers will be relatively inexpensive to insure.
  • Types of insurance: In the section above, we have listed different options, such as business interruption and earthquake coverage. Each of these will add to the cost.

 

Who needs commercial property insurance?

As we have indicated, any business that owns or leases commercial space should have insurance.

 

Benefits of commercial property insurance

There are many benefits to having this type of insurance:

  • Peace of mind: We’re listed this first because you want to sleep soundly at night. Knowing that you are covered in the event of an incident let’s you focus on growing your business and keeping your customers happy.
  • Protect your business from financial losses: Commercial premises insurance normally covers your equipment and inventory. It would be very expensive if you had to replace them without insurance.
  • Keep your employees: When you have to halt operations due to a disaster, you may need to lay off staff, losing their experience and company knowledge. They could flee to work at other organizations. With your insurance payout, you may be able to keep them on the payroll while the business recovers.
  • Reopen quickly: An insurance cheque will help you to resume business as soon as possible. This is important so that you can retain customers and continue to meet their needs. You don’t want them buying from competitors.

 

List of commercial property insurance carriers

Three of the major commercial property insurance providers in Canada are:

  • Intact
  • Zurich
  • Travelers

 

How much commercial premises insurance do you need?

If you have read this far, hopefully you are convinced that every company that leases or owns business space needs commercial property insurance. From there, it’s a matter of deciding what additional kinds of insurance you need. This depends on your type of business. If you provide services from an office and can quickly shift to remote work in the event of a fire or other disaster, you may not need much else. On the other hand, manufacturers will want to have business interruption insurance so that they can get back on their feet following a crisis. Be sure to discuss your circumstances with your insurance broker and they will be able to help you choose the right insurance products.

 

Are you incorporated in Canada?

Small business owners and incorporated individuals in Canada can use a Health Spending Account (HSA) to save up to 40% of their medical expenses.  An HSA has no premiums and it is a cost effective alternative to traditional health insurance.  The plan covers a wide variety of health and dental expenses.  An HSA takes only a few minutes to set up.  Learn more by downloading one of our guides.

 

Learn more about a Health Spending Account by downloading a free guide:

Download the HSA Guide for Incorporated Individuals Download the HSA Guide for a Business with Staff

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