Commercial Property insurance is designed to protect the physical assets of a business, from buildings to equipment to business income, with most clients asking some of the same questions about the policy.

Katelynn Fellows, RPS senior area vice president, Property Insurance broker and Heather Velasquez, RPS area assistant vice president, Property Insurance broker, break down the answers behind the top 10 topics clients bring up most often.

In its most basic form, Commercial Property insurance is designed to cover two major categories: physical structure and business personal property.

Most insureds underestimate the importance of Business Interruption coverage until a loss shuts down operations. Generally, most Commercial Property policies include Business Interruption coverage; if not, it can be added.

The policy defines the circumstances under which business income coverage replaces revenue, including when property or operations are directly affected by a covered peril.

Yes, especially for businesses that rely on ongoing operations for cash flow, revenue and payroll. Even if the building can be replaced, business income insurance helps bridge the financial gap while the business recovers.

The amount of coverage needed depends on several factors and brokers can offer analytics to help property owners determine how much coverage to purchase. RPS uses modeling to account for location-specific risks, such as earthquakes, floods and wildfires, and evaluates appropriate limits based on loss return periods.

"This location-specific approach helps insureds make data-driven decisions on selecting their limits," explains Fellows.

A Commercial Property policy form excludes certain coverages, but they can be added for an additional premium. These coverages include:

  • Replacement Cost Valuation
  • Ordinance or Law coverage
  • Equipment Breakdown
  • Flood, Earthquake and Sewer Backup

Typical exclusions include:

  • Earth movement
  • Flood
  • Costs due to ordinances or laws
  • Governmental action
  • Utility failure
  • Fungus and pollution
  • Nuclear weapons damage and war

However, most exclusions, other than nuclear, can be added through endorsement.

Velasquez emphasizes that these exclusions appear in standard forms and need to be restored through supplemental coverage.

Several strategies may help reduce the policy premium, including:

  • Increasing deductibles
  • Buying a lower loss limit instead of insuring to full value, if the client is willing to bear greater responsibility for the loss amount
  • Investing in loss prevention or mitigation to improve the business's risk profile

Velasquez points out, for example: "In high-risk areas, like wildfire zones, insureds can install water tanks or make improvements that help mitigate loss."

"You pay the deductible first, and then the carrier pays the remaining loss," Fellows explains.

Lower deductibles usually mean higher premiums and lower out-of-pocket costs, while higher deductibles reduce premiums but increase the insured's share of the loss.

Property policies almost always include a deductible, and in layered programs, the deductible may differ by carrier.

  • Named peril covers only the specific causes of loss listed in the policy.
  • All-risk covers all perils except those explicitly excluded. All-risk forms are broader and often more favorable for insureds.

This question is extremely common. The short answer: Higher values mean greater exposure and higher replacement-cost potential.

Velasquez explains that underwriters apply the rate to the updated value, not to the purchased limit.

"Even if you only buy a $50 million limit, the carrier still bases the premium on the actual insured value because the exposure is greater for the insurance company."

These FAQs are a great way to help educate clients, manage expectations and help property owners understand exactly what they're paying for — and why.

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