Protect Your Business From The Unexpected

In the event of a catastrophic commercial property loss, the process of getting your business back up and running can be overwhelming. Although infrequent, these types of claims can severely impact operations, earnings, team members and the company’s reputation. Responding to a loss can seem daunting in the moment, especially considering the first few hours following a loss are some of the most critical. For these reasons, it is important to have a plan in place prior to a loss occurring.

Components of Commercial Property Coverage

One of the most essential steps to getting your business up and running following a commercial property loss is having the right coverage in the first place. The proper coverage can make all the difference between a minor disruption to operations and a severe financial loss.

A commercial property insurance policy is typically divided into several sections, and different types of records are required when documenting each element. Here are the basic components of commercial property policies:

  • Commercial building coverage—Following a loss, property damage may be partial, or the building may be completely destroyed. In the event of a partial loss, the claim will mostly consist of repair costs, including labor and materials. If the building is destroyed, a formal appraisal can help determine the value for claim purposes.
  • Business personal property—Business personal property coverage may include equipment, fixtures, materials or supplies. Equipment and fixtures in need of repair typically only require an invoice to present your claim. However, those in need of replacement may require estimated replacement costs from manufacturers or dealers if they are still relatively new pieces. The replacement of older equipment and fixtures may require your capital assets ledger, acquisition costs, appraisals and maintenance logs before actual cash value can be determined. Materials and supplies figures can be relatively simple to develop based on the last physical inventory plus purchases less sales. The valuation method of your damaged and undamaged property may depend on your policy provisions, and there may be possible issues in treating freight, purchasing and selling expenses, bad debts, shrinkage, returns and allowance, commissions and discounts.
  • Business interruption—Most business interruption policies only take effect when there is a definitive loss of sales due to stopped operations, physical loss or damage to covered property by a covered peril. If you can reduce business interruption by resuming complete or partial operations, utilizing or renting other facilities, or using raw stock, stock in process or finished stock, you may be entitled to recover the extra incurred expenses.
  • Extra expense—Extra expense coverage and expense to reduce loss coverage are considered two separate categories. Expense to reduce loss typically falls under business interruption coverage and requires that every dollar spent reduces the business interruption claim by a dollar. Extra expense, however, must be purchased as a separate coverage under most policies and allows you to spend more than the dollar saved to continue normal business operations.

It may seem overwhelming to deal with a commercial property loss, but fortunately, you don’t have to do it alone. To learn more about commercial property coverage and specific policies available to you, it’s important to work with a qualified insurance broker. Contact us today to learn more.