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If the property you rely on to run your cleaning services business is damaged, whether by fire, theft, or another common peril, it could have major financial repercussions. To protect your business from these risks, consider Commercial Property Insurance.
What is Commercial Property Insurance?
Commercial Property Insurance protects your cleaning company’s business property if it is damaged or destroyed by a covered cause of loss. This coverage can assist your company in recovering if your offices are damaged by a covered peril such as a fire, lightning, windstorm, or other issues. Commercial Property Insurance will provide funds for the repairs or replacement of your property. Since dealing with a disaster can be expensive and difficult, the coverage offered by Commercial Property Insurance can be extremely helpful in allowing your business to continue operating.
- At your carpet cleaning company’s offices, faulty wiring sparks a fire that spreads to flammable cleaning chemicals that are stored at your offices. The fire causes structural damage to the building, as well as damaging computers and furniture. Your insurer would pay for repair or replacement of the damaged property.
What property does Commercial Property Insurance cover?
Commercial Property Insurance covers buildings and the business property you keep at your location, including computer equipment, furniture, office supplies, and other items. It’s important for cleaning services companies to keep in mind that Commercial Property Insurance policies commonly restrict coverage to property that remains at a fixed location, excluding equipment that travels from worksite to worksite. Although some coverage may be provided for tools and equipment that travels with you if it is under a certain value, if your cleaning business uses specialized, high-value equipment, you may benefit from the added protections of inland marine insurance.
Commercial Property Insurance covers buildings or offices that your company owns or leases. Coverage includes permanent fixtures like plumbing and electrical systems, as well as outdoor fences, signs, and other outdoor property that is not directly attached to the building. Buildings in the process of being built are also covered.
- A severe hailstorm damages the roof of your office building. Your insurer would pay for repairs.
Commercial Property Insurance covers the contents of your building or offices, including items such as computers, equipment, and furniture. If your company leases equipment, this property can also be covered by your policy. If your cleaning services company keeps physical client records and bills, Commercial Property Insurance provides a small amount of coverage for these items. More extensive coverage can be purchased with an added endorsement for valuable papers and records coverage.
- Someone breaks into your janitorial services company’s offices and steals computers, monitors, and other items valued at $15,000. Your insurance company will reimburse you for the loss.
Property of Others
If the property of others is in your care, custody, or control and located on your business premises, Commercial Property Insurance will cover it.
- Your cleaning company’s printer breaks, so you borrow a printer from a neighboring business. A lightning strike causes a fire to start in your office, damaging the borrowed printer. Your insurer would pay to repair or replace the printer.
What property isn’t covered by Commercial Property Insurance?
Standard Commercial Property Insurance policies come with a number of excluded property types. The most relevant exclusions for cleaning services companies are below:
- Vehicles or self-propelled machines. If your cleaning business uses company-owned vehicles to perform your work, they will not be covered by Commercial Property Insurance. You will need to purchase commercial auto insurance to cover your company’s automobiles.
- Electronic data. If your company relies on electronic data such as customer records and accounts, it’s important to note that electronically stored data is not covered by Commercial Property Insurance. You may be able to add coverage for electronic data to your policy by endorsement, or you can purchase a separate electronic data coverage policy.
- Property that is not tied to a fixed location. If you transport high-value goods, tools, equipment, or other property with you to worksites, it may not be covered by your Commercial Property policy. Some policies will provide protection for property that stays within a certain distance from your business premises or is valued under a certain amount, but if your cleaning business has specialized, high-cost equipment, you may not have enough coverage under a standard Commercial Property policy. For added coverage on high-value items or moveable property not covered by your property policy, consider inland marine insurance.
What risks are covered by Commercial Property Insurance?
Commercial Property Insurance is offered on an open perils or named perils basis. Named perils policies only cover incidents specifically defined in the policy; any hazards not mentioned in the policy are excluded. Open perils or all-risk policies cover all types of incidents except for specific exclusions mentioned in the policy.
What perils are covered under a named perils policy can vary depending on the insurer, so it’s important to verify exactly what is covered under your policy. Common named perils include:
- Windstorm or hail
- Smoke from accidental fire
- Damage from vehicles or airplanes (excluding those owned or operated by the business)
- Riots or civil commotion
- Water damage from plumbing, HVAC, or sprinklers
- Falling objects
- Sinkhole collapse
- Vandals graffiti the walls of your pool cleaning company’s building. Your insurer would pay for the graffiti to be removed.
Open perils policies cover any causes of damage that aren’t specifically excluded within your Commercial Property Insurance contract. Premiums for this type of policy are considerably more expensive than named perils since they provide coverage for a much wider range of potential incidents. For companies that rely on costly equipment or have a higher level of risk for property damage, open perils coverage may be necessary. If your company is smaller, has relatively low risk exposure, and doesn’t have large amounts of property to insure, a named perils policy may be adequate for your needs.
What perils are excluded from Commercial Property Insurance?
There are a number of perils that are typically excluded from both open perils and named perils policies. These include:
- Ordinance or law. Any loss or damage sustained due to the compliance or enforcement of any ordinance or law is excluded from coverage.
- Earth movement. Natural disasters such as earthquakes, landslides, volcanic eruptions, or any movement of the earth or soil are excluded from coverage. Companies in areas prone to natural disasters can add an endorsement to their Commercial Property Insurance policy to cover those risks, or they can purchase a separate policy.
- Water. Damage or loss caused by water events, including flood, tsunami, mudslide, and sewer or drain overflow, is excluded from coverage.
- Fungus, mold, and rot. Damage resulting from the presence of fungus, wet or dry rot, or bacteria is excluded from coverage.
- Utility services. Any failure in utilities, including power surges, power failures, and water shortages, is excluded from coverage.
- Governmental action. Any property that must be seized or destroyed under governmental authority is excluded from coverage.
- Nuclear hazard. Damage caused by nuclear reaction, radiation, or radioactive contamination is excluded.
- War and military action.
Replacement Cost vs. Actual Cash Value
When you choose a Commercial Property Insurance policy, you can decide whether to insure your property for replacement cost or actual cash value. Replacement cost coverage will pay for you to repair or replace your property with a new item of similar kind and quality to the original. Actual cash value takes depreciation into account, paying only for the value of the item at the time it was destroyed.
Premium costs are higher for replacement cost coverage since the insurer would pay more for replacement. Actual cash value coverage may be sufficient for companies that are able to buy used items as replacements and don’t own equipment that depreciates quickly. Actual cash value policies may not provide enough coverage for companies that rely on specialized equipment that could be difficult to replace.
- Your company’s HVAC system leaks, destroying several computers in the office. Although the computers cost $1,000 each when they were purchased three years ago, due to depreciation, they are now worth $500 each, while a brand new model now costs $800. If you have a replacement cost policy, your insurer will pay $800 for each destroyed machine. An actual cash value policy will only pay $500 for each computer.
Insurers typically require Commercial Property Insurance policyholders to insure a minimum percentage of the property’s value (often 80%) in order to receive full coverage for claims. This is called coinsurance. Most Commercial Property Insurance policies require coinsurance as a way to lessen the likelihood that policyholders will deliberately underinsure their property.
Underinsurance can be tempting for business owners because most damage that occurs to property does not result in a complete loss of property, and purchasing a policy that covers less is less expensive. With coinsurance, however, insurers can reduce the amount they will pay for a claim if the coinsurance minimum is not met. In cases where the property is underinsured, the insurer will reduce coverage proportionally.
- A company’s insurer requires a coinsurance minimum of 80%. The policyholder insures 60% of the value of its property in order to pay a lower premium. The limit of insurance is $1 million. The policyholder suffers a loss of $400,000. Even though this is less than the limit of insurance, the insurer will only pay for 60% of the loss, or $240,000.
Like many types of insurance, most Commercial Property policies have a deductible. This is the portion of a loss that your company is responsible for paying. A policy with a lower deductible will have a higher premium cost because the insurer would have to pay a greater amount in the event of a loss.
A sudden disaster that destroys or damages your property could present a major problem for your cleaning services company. To keep your company protected from unexpected incidents, it’s a good idea to purchase adequate insurance coverage. If valuable property is lost, damaged, or destroyed, the financial assistance provided by Commercial Property Insurance can help get your company back on its feet. Having this coverage can give you confidence that your company will be able to cope with any catastrophes that arise.