Most businesses own some sort of property, such as a building, inventory, or equipment. Unfortunately, if the worst happens and that property is damaged or destroyed, it could spell out financial disaster—especially for small businesses.
As a business owner, it’s essential to protect your property (and finances) from unexpected losses. By purchasing business property insurance, you can rest easy knowing you are able to file a claim if your property is damaged and get help recovering your financial losses.
What Is Business Property Insurance?
Business (commercial) property insurance is insurance coverage designed to protect business property from damage or destruction related to fires, smoke, vandalism, theft, and many natural disasters like wildfires and lightning strikes. This coverage relates not only to buildings where you conduct business but also equipment and inventory required by your business operations.
Keep in mind that most business property insurance policies do not cover personal assets—even if they are damaged on company property—or business vehicles, which should be covered by commercial vehicle insurance.
Additionally, note that there could be exclusions in your business property insurance policy based on your insurer and the risk profile of your business. Carefully review what the insurance policy does and does not cover before purchasing a new policy.
The Average Cost of Property Insurance for Small Businesses
Every business is unique, which means no two business property insurance policies are the same—and premiums are different, too.
The average small business will likely pay anywhere from $500 to $3,500 annually for commercial property insurance coverage. Businesses in higher risk locations, industries, or circumstances, those involving expensive equipment, and those with large amounts of industry may have to pay more expensive premiums to secure adequate coverage.
9 Factors Affecting Business Property Insurance Cost
As with all types of insurance, how much a business property insurance policy costs will depend on a variety of factors, including the following.
1. Location & Risk Exposure
The location and risk exposure of your commercial property is a significant influence on the annual cost of your business property insurance coverage.
If your business is located in a zip code that is known for higher exposure to environmental hazards like wildfires, earthquakes, sinkholes, or hurricanes, insurance companies will charge you a higher premium. Similarly, if your commercial property is located in an area with high crime rates, you are at an increased risk for vandalism or theft, and your insurer will raise your rates to protect against this risk.
On the other hand, if your business is based in close proximity to a fire station or police station, you may be able to secure a reduced rate for your business property insurance coverage.
2. Industry
Some industries inherently involve more risk than others. For example, manufacturing facilities are more hazardous than general office spaces. Riskier operations, which often go hand in hand with more expensive equipment and potential hazards, lead to higher business property insurance premiums.
3. Average Occupancy & Property Use
Insurers will also consider the average occupancy and use of the commercial property in question when calculating insurance premiums.
Occupancy is an important consideration because the number of employees and customers present on your business property as well as the level of daily foot traffic impact your risk exposure—more people equals higher property insurance premiums to cover the increased risk.
Along the same lines, the intended use of the commercial property also impacts premiums. If hazardous materials are stored on site, for example, the associated risk is higher, leading to more expensive property insurance coverage.
4. Type of Equipment & Inventory
What equipment do you and your employees rely on to carry out business operations? The more expensive or dangerous your business equipment is, the higher your business property insurance costs will be.
5. Building Construction
The materials used to construct a commercial building will also impact business property insurance premiums. For example, wood structures are flammable, so many insurance companies consider them more of a liability than buildings made out of bricks or stone.
6. Age of Building & Equipment
How old is your building? How about the equipment you use? Older property will cost more to insure than newer property because it is more likely to deteriorate or sustain damage after an unexpected event.
7. Security & Safety Measures
Installing security and safety measures on your commercial property can, in many cases, significantly reduce business property insurance premiums. Fire alarms, sprinkler systems, security cameras, fire extinguishers, and other measures help limit the likelihood of sustaining property damage and filing a claim, so they often decrease insurance rates.
8. Level of Coverage
The cost of your business property insurance policy will depend on the level of coverage you want to purchase. For example, while higher coverage limits will ensure you are covered for more incidents, they will usually increase the cost of your commercial property insurance policy.
9. Property Value
Higher commercial property values are likely to lead to more expensive policy rates, largely due to the higher costs of replacing or repairing the property when damaged. The insurance company will consider the location, age, and construction of the business property and factor in expenses such as materials and labor before establishing your business property insurance premium.
Looking for Business Property Insurance Coverage in Michigan? Contact Melton McFadden
At Melton McFadden, our experienced insurance professionals can help you develop a business insurance plan that protects your business, property, employees, revenue, and peace of mind. We are ready to guide you through the process of identifying areas of risk, finding gaps in your current commercial insurance plan, and creating a business insurance solution that works best for you and your company.
Whether you are looking to protect your property or secure additional insurance for your business, we’re here for you every step of the way.
Contact us today or request a free quote to get started.