If your business property is damaged through fire, theft, or other covered perils, the financial impacts of costly repairs and replacements can be staggering. Additionally, your business may rely heavily on fitness equipment, so any damage to this equipment can have direct impacts on your ability to operate. To protect your business from these types of risks, it is important to consider Commercial Property Insurance. 

What is Commercial Property Insurance?

Commercial Property Insurance provides financial protection for your business property, including buildings, equipment, furniture, and inventory. If your company’s business property is damaged or destroyed by a covered peril, your insurer will provide financial support to assist your company in repairing or replacing your property. 

Example: 

• The candles in your yoga studio spark a fire that destroys your fitness equipment and causes significant structural damage to your building. Your insurer would pay to replace your fitness equipment and repair your building.

What property does Commercial Property Insurance cover? 

Commercial Property Insurance covers buildings, the contents within your buildings, and any property that is in your care, custody, or control. 

Buildings 

Commercial Property Insurance covers the buildings or commercial spaces belonging to or leased by your company. For sports and fitness businesses, it’s common to rent studio space or commercial property, and many lease agreements will require you to secure sufficient property coverage. Commercial Property Insurance can provide funds to repair or replace business property that is damaged by a covered peril. In addition to permanent fixtures, this coverage includes outdoor property not directly attached to the building. 

Example: 

• An intense hailstorm shatters the glass walls of your recreation center and punctures your roof. Your insurer can pay for your repairs under Commercial Property Insurance. 

Contents

Commercial Property Insurance covers the contents within your building. This is especially important in the sports and fitness industry due to the large amount of fitness equipment that these businesses typically rely on. Your coverage includes the equipment that you own, as well as any property that you lease. Coverage extends to items such as computers, furniture, artwork, inventory, and more.

Example: 

• Overnight, vandals sneak into your gym and damage some heavy fitness machines by knocking them over. Your Commercial Property Insurance policy will pay for the repair and/or replacement of your fitness equipment.

Property of Others

Commercial Property Insurance covers the personal property of others—such as customers—when it is in your care, custody, or control and located within your business premises. For fitness businesses that provide lockers or locker rooms for customers to temporarily store their personal possessions, this coverage may not be sufficient as the limits are typically low. For more comprehensive coverage of customer property, consider bailee’s insurance.

Example:  

• Customers often bring personal belongings to the gym and leave them with the receptionist during class. During a Zumba class, your receptionist accidentally spills coffee on a customer’s phone. Your insurance would cover the damages.

What property is not covered by Commercial Property Insurance?

There are a number of exclusions under a standard Commercial Property Insurance policy, so it’s imperative to review your policy if you are curious about a specific type of property. When it comes to the sports and fitness industry, a relevant exclusion is electronic data. If your company relies on valuable electronic data such as customer records or software programs, keep in mind that Commercial Property Insurance does not cover this electronic data. Instead, you may want to consider purchasing a separate electronic data policy. 

Additionally, vehicles are not covered by Commercial Property Insurance. This includes company-owned vehicles used to perform work. For instance, if your personal trainers drive to client locations, you will need to purchase commercial auto insurance to provide financial protection for your company’s automobiles. 

What risks are covered by Commercial Property Insurance?

For Commercial Property Insurance, you can choose between a named perils policy or an open perils policy. As the title suggests, a named perils policy will only cover risks specifically named in the insurance contract. On the other hand, open perils policies will cover all risks except those specifically excluded. 

Named Perils 

Your policy will specify which incidents are covered by your Commercial Property Insurance. This varies depending on your insurer, but some common named perils include: 

• Fire
• Lightning
• Explosion
• Windstorm or hail
• Smoke from accidental fire
• Damage from vehicles or airplanes (excluding those owned or operated by the business)
• Riots or civil commotion
• Vandalism
• Water damage from plumbing, HVAC, or sprinklers
• Falling objects
• Sinkhole collapse

Example: 

• The sprinkler system in your dance studio malfunctions and water seeps into your floorboards, making the wood expand and distort. Your insurer can pay for your floor repairs under Commercial Property Insurance.

Open Perils 

Under open perils coverage, your policy will cover any damage to your business property unless it is specifically listed as an exclusion in your contract. Open perils policies are typically more expensive than named perils policies because of the broader coverage. If your business relies on various expensive equipment, it may be worth it to consider this policy.

What perils are excluded from Commercial Property Insurance?

There are many exclusions commonly listed on both open perils policies and named period policies, including the following:

• 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 Policies 

Your Commercial Property Insurance policy will provide you with two options for valuing your property: replacement cost (RC) or actual cash value (ACV). 

Replacement cost coverage will cover the cost to repair or replace your damaged business property with a new item of similar quality. Note that this option does not take depreciation into account. 

Actual cash value covers the value of the property at the time of the loss, so depreciation is taken into consideration when valuing the damaged property. Premiums for replacement cost coverage are typically higher due to the higher payout. 

Example: 

• You purchase a brand-new treadmill for $1,000 for your fitness center. Two years later, an electrical fire breaks out and damages most of your equipment, including your treadmill. Due to depreciation, the current value of the treadmill is $700. Under an actual cash value policy, your insurer will only pay you $700 because that is the value of the property at the time of the loss. However, a brand-new treadmill of similar quality is $900. With a replacement cost coverage policy, your insurance would pay you $900 because that is the cost of a similar item.

What is coinsurance?

Many insurance policies require you to insure a minimum percentage of your business property value—usually 80%—in order to get the full value of a claim period or receive full coverage for claims. This minimum is called coinsurance, and it decreases the likelihood of businesses intentionally reporting lower values for their property to try to save on premiums.  

Because partial insurance losses are more common than total losses, purchasing a policy that covers a lower value is tempting because the premium is less expensive. Coinsurance serves to discourage this underinsurance. Your insurers can reduce the amount they pay for a claim if the coinsurance minimum is not met. 

Example: 

• Your insurer requires a coinsurance minimum of 80%. The building that houses your martial arts studio has a value of $300,000, but you only insure 50% of the value of the property to try and save on premiums. Due to a fire, your building suffers damages of $100,000. Although this amount is less than the limit of the insurance, your insurer will only pay $50,000 (50% of the loss) because you did not meet the coinsurance minimum.

Are there deductibles in Commercial Property Insurance?

Most Commercial Property Insurance policies include a deductible. The deductible is the amount of a loss that your business is responsible for paying before the insurance coverage begins. Typically, a higher deductible means a lower premium because the amount an insurer would have to pay is reduced. 

Additional Property Coverages

Business Income Insurance

Many sports and fitness businesses rely heavily on physical locations and equipment to function effectively. As such, damage to your property could mean an interruption of business. Business income insurance would provide coverage for loss of income and operating expenses (such as rent and payroll) if your business is interrupted or temporarily shut down due to property damage. It is particularly important for sports and fitness businesses to consider this additional insurance. After all, a majority of revenue likely comes from the physical location being open. 

Equipment Breakdown Insurance

With the vast amount of fitness equipment typically found within a sports and fitness business, equipment breakdown insurance is essential to cover the repair or replacement of damaged equipment. Standard Commercial Property Insurance policies do not cover the breakdown of equipment, so it is important to consider adding equipment breakdown insurance as an endorsement or a standalone policy. 

Inland Marine Insurance 

Inland marine insurance is a form of insurance that covers property not tied down to a fixed location and not covered by a standard Commercial Property Insurance policy. Many personal fitness trainers are required to bring the necessary equipment to their clients. If something were to happen to the equipment during transport, inland marine insurance would cover the damages. 

Virtual or Remote Fitness Coverage

The COVID-19 global pandemic has transformed the sports and fitness industry as more and more individuals turn to online fitness options. If you are teaching virtual fitness classes online, you are likely using equipment at home to conduct these courses. It is important to review your policy for more details about property coverage used off-site by remote workers. In general, the business equipment you use at home will likely be covered by your Commercial Property Insurance, but there is typically a low sub-limit for property off business premises. If your equipment exceeds that limit, consider adding additional locations to your policy. Typically, there is no extra cost for additional locations under your coverage because there is no change in the actual business property covered. 

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.

Some of the factors that can affect your premium pricing include:

• Claims history. A history of prior losses can increase your premiums.
• Neighbors. Neighbors engaged in risky activities, such as a dry cleaner using flammable solvents or chemicals may increase your premiums.
• Fire risk. Having a fire station nearby may lower your premium. Fireproof (brick or stone) construction or fire-resistant interior floors, walls, and doors cost less to insure. Fire alarms or sprinkler systems may also reduce your rates.
• Neighborhood. The surrounding neighborhood characteristics can also affect your rate. If the immediate area has high levels of criminal activity or is exposed to frequent accidents or natural disasters, your rates may be higher. Also, if you have neighboring businesses with high fire risks such as a restaurant, you may also face higher rates.

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:

Provider	Commercial Property	Business Interruption	Inland Marine
CoverageSmith	??	??	??
CoverWallet	??	??	??
Thimble	??	??	??

Final Word 

Many businesses in the sports and fitness industry depend on functioning equipment and an adequate location. Damage to your business property due to unforeseen disasters can be detrimental to your company. To ensure that your business is protected from these sudden mishaps, it is essential to consider Commercial Property Insurance. Purchasing adequate insurance coverage can give you peace of mind during major catastrophes and ensure that your business continues to thrive.