Unpacking Misconceptions About Commercial Property Insurance Myths

When discussing commercial property insurance, some business owners believe in certain misconceptions, which can lead to unrealistic expectations and unnecessary risks. Understanding commercial property insurance might seem difficult, but you got this.

It seems overwhelming to understand the things that are insured and the cover limits. However, if you avoid the insurance myths, a lot of confusion will be resolved. This will give you an idea of what is covered under insurance.

What Is Commercial Property Insurance?

Before discussing the myths, let’s clarify what commercial property insurance covers. It is designed to protect physical assets, such as buildings, equipment, and inventory, against damage or loss due to various risks. 

These include natural disasters, theft, vandalism, fire, and water damage. The insurance also covers loss of income for businesses that cannot operate due to an insured event.

Now, let’s address some common myths associated with commercial property insurance.

Common Commercial Property Insurance Myths

Having a property insurance plan is important. It protects the property from unexpected mishaps, which can ruin the damage and structure of the property.

However, there are some myths associated with property insurance. Here are those mentioned.

Myth 1: “My Business Is Fully Covered for Everything”

One of the most common myths is that commercial property insurance covers all possible risks. Even though the insurance covers a lot, there are certain things that they do not cover. In any standard policy, some specific things are excluded, such as:

• Earthquakes and floods: The Australian property insurance policy specifically excludes natural calamities like earthquakes and floods. However, some places might also include these in the list but charge additional costs. 
• Acts of terrorism: Certain insurance policies exclude damages caused by terrorism. So, when you are signing, check carefully whether it is included.
• Wear and tear: Any commercial property insurance you take does not cover the general deterioration with time or the damage to the equipment.

Every business must review its policies to understand their limitations and identify areas where additional protection might be needed.

Myth 2: “I Only Need Insurance for My Building, Not My Equipment”

Another insurance myth is that it only covers the building and not its contents, such as stock, equipment, and machinery. However, it most often covers these aspects. If not, you can customize the policy and include these.

Building Coverage vs. Contents Coverage

• Building coverage protects the physical structure. It includes the roof, walls, and some external elements like signage.
• Contents coverage covers items inside the property, such as inventory, office equipment, furniture, and machinery.

If you have a business that depends heavily on inventory and equipment, like manufacturers and retail stores, you will need content coverage. A major loss of assets can affect business operations, so make sure the policy covers these.

Myth 3: “Business Interruption Is Automatically Included”

One of the other insurance myths is that commercial property insurance automatically includes business interruption insurance.

Well, some policies do include business interruption insurance, but not always. In some policies, it comes as a separate insurance policy, or you have to add it additionally.

What Is Business Interruption Insurance?

Business interruption insurance is specifically designed to cover loss of income if a business cannot operate for a while because of an insured event. This helps the business cover the wages, operating costs, and other costs during the recovery period.

For example, if your property is damaged by a fire and you have to close the business temporarily, business interruption insurance will cover the employees’ loss of income during this period. It is necessary to incorporate this as an add-on.

Myth 4: “My Insurance Will Cover Losses from Employee Theft”

Commercial property insurance covers a wide range of risks, but it often excludes theft by an employee. This mostly falls under a separate insurance policy known as employee dishonesty coverage or fidelity insurance.

If your business handles a lot of cash or inventory, you must consider employee theft. Discuss it with your insurance and get the right policy for that.

Myth 5: “My Business Is Small, So I Don’t Need Commercial Property Insurance”

Small business owners often ignore commercial property insurance, thinking that their small organization won’t need it. But this is a myth.

Risks Are Real for All Business Sizes

The business size does not matter when you think the assets might be at risk. Financial damage, a small break-in, or a fire can put any business at risk. 

This is even more true for small businesses, as they might not have the resources to recover as quickly as a large business.

Myth 6: “I Can Rely on My Landlord’s Insurance”

If you have rented a property for your business, you might think the landlord’s insurance will cover all the risks. However, that is not the case. It protects the building but not the assets inside it.

Why You Need Your Coverage

The landlord’s insurance is mainly designed to protect the physical structure of the building. The equipment and assets inside the building are not included; those are your responsibility. Moreover, a landlord’s policy will not cover some risks specific to business operations.

For example, the stocks must be separately insured if you have a retail store. Make sure that you choose the right policy to protect the assets, even if the place is rented.

Myth 7: “Landlords Don’t Need Property Insurance”

This is another common insurance myth. People believe that landlords don’t need property insurance. It does not matter if they own a vacant property or rent it to any business; they will need insurance to cover it. 

One of the most common risks of having an empty structure is vandalism. This covers the major part of an insurance claim. 

Rental properties often have dangers, such as smoke and fire damage. Personal injury is included if a visitor is physically hurt because of the condition of the property.

Myth 8: “Insurance Premiums Are Too Expensive for Small Businesses”

Some commercial property insurance policies are indeed costly. However, insurance is not always expensive. That is a wrong perception to have. There are several ways small businesses can manage costs:

• Tailor your policy: Ensure your coverage is designed to protect your business assets without paying for unnecessary extras.
• Increase your excess: Opting for a higher excess can lower your premiums.
• Risk management: You can get a discount on premiums if you include some safety measures and reduce the risk factors.

Investing in insurance that covers all the necessary parts of the business is going to be more cost-effective than risking a financial mishap because the insurance will not cover all the bases.

Understanding Your Insurance Policy

Insurance myths are a real thing. And various myths revolve around commercial property. So, it is important that you know the reality of it, what it covers, and what additional things you have to consider.

It is a necessary step for all business owners. Moreover, review the policies regularly, ask for advice from the insurer, and adjust the coverage to ensure it covers all the necessary business grounds.

If you get the right protection, you will have a secure business, knowing that all the important assets are safeguarded. Do not give in to the misconceptions; be careful. Take the time you need and make sure your business is covered.

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