November 16, 2021

Property Insurance for Businesses

Property Insurance for Businesses

Commercial Property Insurance is a line of Business Insurance policies that provide coverage to commercial assets, such as plant and machinery, building, raw materials, stock of finished goods, equipment, furniture and fixtures, cash, and important documents. These are some of the most essential insurance policies that every small, medium, or large sized business needs to get.

Property Insurance policies are designed to cover multiple businesses such as service providers, manufacturers, retail shops, warehouses, restaurants, hotels, and non-profit organizations against any sudden loss or damage due to unforeseen events. Policies like Fire and Allied Perils Insurance, Machinery Breakdown Insurance, and Electronic Equipment Insurance, can help companies protect their physical assets from a number of risks such as fire, natural disasters like floods and earthquakes, theft, malicious damage, riots, or even terrorist attacks.

Commercial Property Insurance policies provide financial coverage in the form of reimbursement for any accidental damage or loss to your commercial buildings, their contents, and any assets adjacent to them. The property insured under these policies can be owned, leased, or rented by your business, as long as you have an insurable interest in them.

Here’s a list of assets which are generally covered under Commercial Property Insurance:

  • Your commercial building along with any fixtures or permanently installed equipment
  • Plant and Machinery
  • All office contents including computers, furniture, fixtures, etc.
  • Stock and inventory
  • Manufacturing or processing equipment and tools
  • Cash, important documents, and other valuables
  • Other structures inside the business premises, such as fences, signs, satellite dishes, and landscaping

Some policies like Fire Insurance also cover the personal effects of directors, officers, and visitors up to a certain limit.

Commercial Property Insurance policies can carry hefty premiums depending on a number of factors like location, susceptibility to risk, value of property, and nature of business. Let’s look at some of these below:

  • Reinstatement or replacement value of the property being insured- This is one of the most primary factors considered while calculating the Sum Insured and the premium for a Property Insurance policy. Reinstatement or Replacement cost represents the value of the commercial property at the time of policy commencement. Some policies also raise the sum raised periodically to account for inflation in this cost
  • Security measures- The kind of security measures established at your building, such as sprinkler systems, fire alarms, fire extinguishers, lock systems, etc. will also be considered. If your building does not have adequate safety precautions to help prevent the spread of a fire, the occurrence of a theft, or any other disaster, then the premium you'll have to pay will turn out to be higher on account of the high risk
  • Location- If your business is located in regions prone to the occurrence of risks like riots, floods, earthquakes, cyclones, or theft, your premium will likely go up. On the other hand, businesses located in safer areas where the likelihood of such risks is lower, will have to pay lower premiums for the same coverage
  • Structure of the commercial property- Things like the flammability and fire-resistance of building material, its contents and any additional structures or alterations made to the building will also be taken into account by the insurance company while determining the exact premium amount

Property Insurance can benefit your business in a number of ways. It acts as a security blanket during hard times, ensures the continuation of your business in the face of unexpected disasters; and keeps your finances secured no matter what.  Given the recent increase in events like floods, cyclones, terrorist attacks, riots, and robberies, there is a critical need for businesses to get such protection.

Types of Business Insurance policies available in India

Opinions, conclusions and statements of intent expressed in this article are that of the author and Verak does not accept liability for the views expressed unless confirmed by an authorized representative of the Company independently of this communication.