Commercial Property Insurance

Similar to commercial general liability policies, commercial property policies typically cover perils on a named basis.  Therefore it is important to determine what risks are prevalent to the establishment.  These policies are generally written on either a basic, broad, or special basis. The first two defines which perils are covered, while the latter covers all direct physical losses except for the exclusions.  Again it is important to determine every aspect of what perils are inherent to the business.  

An auto body shop typically owns equipment needed for frame straightening and painting which may cost a considerable amount of money to replace.  Other equipment may include the mixing machines for the paints and clear coats, the compressors, lifts, spray booth, pneumatic tools, inventory, and computer diagnostic equipment.  It is important to periodically review the equipment list to ensure a proper amount of coverage is provided to replace the equipment in the event of a loss.  Certain factors should be considered in determining the value such as the recoverable methods, the total values, an itemized breakdown by classification, the deductible, and the coinsurance clause.  

Settlement options describe the recovery method to be used prior to the loss and is typically on either a replacement cost or actual cash value basis.  However, an agreed or stated amount can be offered to provide a predetermined settlement amount.  If depreciation is a concern, it is generally recommended that a settlement option which does not drastically depreciate the described items.  

Machinery & equipment can often be scheduled by classification.  Heavy or mobile equipment is often excluded on a standard business personal property form, hence it prudent to schedule this equipment usually as a separate floater with its own limits.  Often times, this allows for greater flexibility and control with the insurance costs and coverage.  Another advantage of itemizing the equipment is the ability to specify the perils of coverage by category.  It is difficult for large machinery to be stolen, however, hand and pneumatic tools as well as parts often grow feet as the expression goes, therefore covering the smaller items on a special form including theft and the heavy equipment without it, offers the shop owner the ability to save money on the insurance cost while protecting the items from perils based on their needs.  

By William F. Schaake, CIC, CRM © 2011-2012 All rights reserved