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Commercial Property Insurance

Commercial property insurance helps businesses, including farms and ranches, pay to repair or replace buildings and other property damaged or destroyed because of fire, storm, or other things covered by your policy.  It also pays to replace stolen or lost property. Business owners can buy commercial property insurance regardless of whether they own, rent, or lease a building.

If you rent or lease a building, consider tenant coverage that will insure your on-premises property, including machinery, furniture, and merchandise. A building owner’s policy doesn’t typically cover the contents of the building that belong to you. The cost of tenant coverage is usually less than building coverage because the policy only covers contents.

Businesses with multiple locations can be covered under a single policy, unless they have different functions and different risk profiles. This could be the case if your business has an administrative office and a separate factory. If your business has operations at multiple locations, ask your agent if you need separate policies.

Types of Commercial Property Policies

There are three types of commercial property policies in Texas. The policies protect against different causes of damage, commonly called “risks.”  These include fires, lightning storms, windstorms, or damage caused by vehicles and civil commotion.

Be sure to read your policy carefully. You may need to buy additional coverages or specialized policies -- such as flood, windstorm, or crime coverage -- to fully protect your business.

  • Basic form policies typically cover common risks.
  • Broad form policies typically cover the common risks in addition to water damage, structural collapse, sprinkler leakage, and damage caused by ice, sleet, or weight of snow.
  • Special form policies cover all types of risks except those the policy specifically excludes. Common exclusions include damages from flood, earth movement, war, terrorism, nuclear disaster, wear and tear, and insects and vermin.

Most commercial property policies cover damage from windstorms except in counties on the Texas coast. However, companies may exclude windstorm and hail coverage from policies they sell in the 14 coastal counties and parts of Harris County on Galveston Bay. If your business is in one of Texas’ coastal counties, you’ll need a separate windstorm policy. (Refer to the section on windstorm coverage for more information.)

Replacement cost and actual cash value coverage

Commercial property policies provide either replacement cost coverage, actual cash value coverage, or a combination of both. Replacement cost coverage will pay to replace your property with new property of like kind and quality, up to the policy’s dollar limit. An actual cash value policy will pay the replacement cost of the property minus depreciation due to age and normal wear and tear. Although replacement cost coverage is more expensive than actual cash value coverage, it might better ensure that your business fully recovers after a loss.

Commercial Property Coverages

Commercial property policies are not standardized in Texas. Insurance companies must meet minimum state requirements but may develop their own policies. As a result, coverages and policy terms may vary by insurance company and by policy.

Commercial multi-peril (CMP) policies combine multiple coverages -- such as commercial property, liability, inland marine, and commercial auto -- to provide full protection with a single policy. It’s typically cheaper to purchase a CMP policy than to purchase the coverages individually.

Business owner program (BOP) policies are a common type of commercial policy primarily for small businesses. BOP policies combine property and liability coverage in one policy.

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