Commercial Property Insurance: Protecting Your Business’s Physical Assets

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Commercial Property Insurance: Protecting Your Business’s Physical Assets

While **General Liability Insurance** (Article 7) covers physical harm to third parties, **Commercial Property Insurance** covers the physical assets of your business itself. This crucial policy protects the buildings, inventory, equipment, and contents that your company relies on to operate.

What Commercial Property Covers

A standard policy protects your business assets from covered perils, which generally include fire, windstorms, hail, theft, and vandalism. It covers three main categories:

  1. **Building:** The physical structure, permanent fixtures, and additions if you own the real estate.
  2. **Business Personal Property (BPP):** Everything inside the building, including furniture, computers, manufacturing equipment, and inventory.
  3. **Business Interruption (or Loss of Income):** This is a critical add-on that covers lost profits and ongoing operating expenses if a covered peril forces your business to temporarily close.

Replacement Cost vs. Actual Cash Value

Just like home insurance, you face a choice when insuring your **commercial real estate** and BPP:

  • Replacement Cost Value (RCV): Pays to replace damaged property with new items of similar kind and quality, without subtracting for depreciation. **(Recommended)**
  • Actual Cash Value (ACV): Pays the RCV minus depreciation, leaving a funding gap you must cover.
Key Protection: The **Business Interruption** component is often the most important, ensuring a small business can survive the months-long recovery period after a major fire or storm.

Adequate **Commercial Property Insurance** protects your balance sheet by securing the tangible assets that generate your company’s revenue.