Often, business owners purchase commercial property insurance as part of their BOP policy. This type of commercial coverage will protect your business—whether you are a manufacturer, retailer, service-oriented business or a nonprofit— in the event of losses from natural disasters, including storms, fires or floods; as well as theft, accidents and other damage. In short, commercial property insurance will cover your building, if you own it, or a leased or home office, as well as the physical assets—both indoor and outdoor—that belong to your business such as: 

• Furniture
• Equipment
• Tools
• Inventory
• Outdoor signage
• Fences
• Landscaping

In addition to covering the above, as a business owner, you may have other important assets you’ll need to protect, including pertinent documents, computer records and even lost income due to suspended business operations. Coverage can be tailored to include additional protection such as valuable papers and records coverage that will help cover payment to reproduce documents, provide temporary storage or removal of records. You also many want to add coverage for glass or valuable breakage.  

To help you better understand what kind of coverage you’ll need, it’s important to take inventory of the physical assets of your business. Once you have an accurate assessment of your business’ assets, including the physical space as well as indoor and outdoor possessions, you can work with a Colstan and Associates agent to determine the extent of your coverage. Here’s what to consider: 

• Business Location: Is your building or office space located in a city or town that has good fire protection or is your business located in an area that has limited fire protection?
• Building Construction: You could be eligible for a discount if your building or office space is made of fire-resistant materials. Conversely, if possibly combustible materials were used in the construction, you could face higher premiums. If you plan on remodeling or adding to the structure, be sure to check with an agent first since this may affect fire ratings. Internal structural elements such as walls, floors and doors should all be made of fire-resistant materials to ensure a good fore rating.
• Building’s Occupancy: The type of business you conduct as well as that of any other tenants in the building directly affects premium costs. For example, rates will be lower for an office building vs a restaurant, auto-repair shop or a more hazardous tenant.
• Fire and Theft Protection: Is there a fire department near your business? How close is the nearest fire hydrant? Is there a fire alarm, sprinkler system and/or security system?

The losses covered by a commercial property plan are based on the replacement cost (RC) of an item or its actual cash value (ACV):

• RC-This cost is based on the amount of money it takes to repair, replace or rebuild property on the same location, using materials that are similar and of the same quality. No amount is deducted for depreciation.
• ACV-This refers to the cost to replace a business using new property of similar quality and style. Depreciation is taking into account.

In most cases, premiums are lower for policies covering property insured on an ACV basis. This is because a lower limit is being used due to the deduction for depreciation. If you decide to insure your property on a RC basis, the coverage may not be enough.