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Commercial Property Insurance for IT Professionals

Commercial Property Insurance for IT Professionals

Get a quote on Commercial Property Insurance

If an unexpected catastrophe such as a fire, lightning strike, or storm damages your property, the costs of recovery can be significant. In addition to the costs of replacement or repair, you may be unable to continue operating your business if key property is damaged or destroyed. Most businesses operate in space they rent or own, and businesses in the IT industry often rely on technology that could be difficult and expensive to replace in the event of a disaster. This is why most companies carry Commercial Property Insurance to protect the value of their property.

What is Commercial Property Insurance?

If your business property is damaged or destroyed, Commercial Property Insurance can pay for the costs of recovery. It’s important for companies to carry this type of insurance because dealing with a disaster is expensive, and property loss or damage can make it difficult for a company to continue its business with minimal interruption.

Examples:

What property does Commercial Property Insurance cover?

Commercial Property Insurance covers buildings, property owned by your business, and the property of others when it is in your care, custody, or control. It’s important for IT companies to keep in mind that Commercial Property Insurance typically only covers tangible property and does not cover electronic data. Companies that want protection for electronic data can, depending on the type of damage or loss, add an endorsement to their policy, purchase a separate electronic data coverage policy, or obtain cyber liability insurance.

Buildings

Commercial Property Insurance covers buildings or offices that your company owns or leases. It includes items that are permanently affixed to the building, such as plumbing, electrical systems, machinery and equipment, and other permanent fixtures. Commercial Property Insurance also commonly covers buildings that are in the process of being built, outdoor fences or signs, and any landscaping.

Example:

If you rent a building or office space, your lease may require you to have Commercial Property Insurance. Most commonly, the landlord’s Commercial Property Insurance will cover the structure itself, while tenants will purchase their own Commercial Property Insurance to cover the building’s contents and tenant improvements.

Contents

Commercial Property Insurance covers the contents of your building or offices, including items such as computers, equipment, furniture, tools, and inventory. Leased equipment is also covered if the lease contract requires you to insure it.

Example:

For IT businesses that store important business records in paper form, Commercial Property Insurance commonly covers the cost to replace or restore valuable papers and records that are damaged or destroyed. The standard coverage for valuable papers and records is minimal, with common limits set at $2,500 per premises. For more extensive coverage, consider an endorsement or extra coverage for valuable papers and records.

Property of Others

Commercial Property Insurance covers personal property of others that is in your care, custody, or control and located on your business premises.

Example:

Note that coverage for property of others is separate from contents coverage and typically has a low limit of liability. This likely would not be sufficient coverage for businesses that frequently take possession of others’ property, such as computer repair companies. Bailee’s insurance would provide more suitable coverage.

What property isn’t covered by Commercial Property Insurance?

Standard Commercial Property Insurance policies come with a number of excluded property types. Below, we’ve listed the relevant exclusions for IT professionals:

What risks are covered by Commercial Property Insurance?

Commercial Property Insurance is generally available in two common types: named perils and open perils. Named perils policies only cover the incidents specifically mentioned in the policy, and exclude everything else. Open perils or all-risk policies cover everything except for specific exclusions mentioned in the policy. Because open perils policies provide more comprehensive coverage, the premiums are higher for these policies.

Named Perils

What perils are specified varies depending on the contract, so it’s important to confirm what’s covered with your insurance company. Common named perils include:

Example:

Open Perils

Open perils policies cover any causes of damage that aren’t specifically excluded within your Commercial Property Insurance contract. Since open perils policies generally provide more coverage than named perils policies, you’ll end up paying more for a policy written on an open perils basis. The higher price may well be worth it if you’re unsure as to what perils your business may need to be covered by, or if your business is exposed to a higher level of risk or needs to protect expensive equipment. For most smaller IT businesses, a named perils policy may be sufficient, but for those with high-end electronic or computer equipment, an open perils policy may be the safer bet.

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:

What’s the difference between replacement cost and actual cash value policies?

When you select a Commercial Property Insurance policy, you can choose 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.

Replacement cost coverage results in higher premiums because the insurer will pay higher costs for replacement. Actual cash value may be more economical for companies who are able to buy used items as replacements. Companies in the IT industry should keep in mind that computers and other technical equipment depreciate quickly. Specialized equipment used by IT firms may be difficult to replace, and actual cash value policies may not provide enough coverage.

Example:

What happens if your property isn’t valued properly? What is coinsurance?

When you purchase a Commercial Property Insurance policy, insurers typically require 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. Coinsurance is included in most commercial property insurance policies in order to discourage underinsurance.

Business owners may be tempted to underinsure their property because most damage that occurs to property does not result in a complete loss of property, and purchasing a policy that covers less would be 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.

Example:

Are there deductibles in Commercial Property Insurance?

Like many types of insurance, Commercial Property policies typically have a deductible, which is the amount your company is responsible for paying before the insurer’s coverage begins. Higher deductibles result in lower premiums because the amount the insurer would pay is lower.

Pricing and Quotes

Insurance companies take the basic information that you provide to them and calculate the risk of loss for your business. Part of this calculation will involve assigning a Commercial Property Insurance rating, which is specific to the building or property you’re looking to insure. The higher risk your business is rated, the higher the premiums will be.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer property policies:

ProviderCommercial PropertyBusiness InterruptionInland Marine
CoverageSmith✔️✔️✔️
CoverWallet✔️✔️✔️
Thimble✔️✔️✔️

Final Word

Companies in the IT industry often depend on expensive, difficult to replace technology. Damage to crucial items such as computers or servers can bring your business to a standstill, and repairs or replacements can be costly. It’s important to make sure you have enough coverage to protect your company from unforeseen disasters. Commercial Property Insurance is a key coverage that will give you and your clients peace of mind that your business will continue to function in the event of a disaster.

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