How Does Commercial Renters Insurance Work?
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What It Covers
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A standard commercial renter insurance policy is more commonly referred to as small business property insurance. It protects the equipment, machinery, inventory, and furnishings in a business space rented or leased from someone else. Because businesses face many of the same risks that homeowners do, even if you don't own the actual structure, you need to protect the physical assets of the business against fire, smoke, theft, vandalism, and water damage not caused by a flood.
A commercial business insurance policy typically does not cover water damage from floods or damage from an earthquake. Like a property owner, a business owner must purchase supplemental flood or earthquake insurance depending on the geographical location and risk. While a landlord generally carries insurance that covers the property and any structures on the property, it does not cover the contents of the buildings.
If you are renting a business space, you also need to protect yourself in the event that a liability suit is brought against you. Liability is standard coverage that protects your assets if someone is injured on the property. Policies provide liability coverage for claims brought against you for bodily injury or damage to the property of others. In certain situations, liability insurance protects the property of others. Most business insurance policies provide protection for several different kinds of losses, all included in one insurance package.
Types of Policies
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Policies vary; therefore, it's important to ask about coverage limits and the different plans available. In some cases, a business owner renting a space may have to purchase additional coverage for particularly valuable contents. While there are basic plans available, which cover damage or loss in the event of a fire or storm, an all-risk policy is a comprehensive plan that normally provides adequate coverage for most small businesses.
Business owners should keep in mind that the landlord can sue the business if an employee causes damage to the property. Property can be insured either for its actual cash value or replacement value. Cash value coverage considers the age and condition of the assets at the time of loss, and it only pays a percentage of the original value. In other words, you would be paid the current value, which has depreciated according to the length of ownership. Replacement value pays the full cost to replace what is lost. Obviously, replacement value policies cost more. However, since inventory, office equipment or machinery would be expensive to replace if damaged or lost, the added cost to purchase a replacement value policy might be the better choice. Remember that any claims will be minus the deductible.
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Before Buying A Policy
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Contact several different insurance companies to get quotes before purchasing a commercial business insurance policy. There are numerous Websites that can provide you with online quotes from major companies. You will find some of these in our Resources section.
When it comes to premiums, insurers consider the risk of loss from fire among the many factors determining the cost of commercial business insurance. Insurance agents experienced in the risks involved can provide you with specific information about the extent of insurance coverage your particular type of business may require. If you don't have the right insurance coverage, serious property losses can cause your business to fail. Review your lease with your insurance agent. You want to be sure that your policy will cover the loss of any property for which you are legally responsible. That's according to the terms of the lease. Compare policies to be certain that you are purchasing an adequate amount of coverage for your particular business situation.
Other Facts About Business Insurance
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More commercial business policies are written each year than personal policies. Policies even cover the business sign hanging outside. However, commercial insurance policies do not cover normal wear and tear of machinery and equipment. Regular maintenance does not fall under the category of unpredictable or accidental events. That is considered to be the responsibility of the business owner. When shopping for a policy that is right for your budget, the lower the deductible (money you pay out of pocket), the higher the premium will be. If you can afford to pay a higher deductible, you can reduce the cost of the insurance and save a few dollars. Ask your tax adviser if the premiums you pay for business insurance can be deducted as a business expense on your federal income tax return.
Filing A Claim
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In the event that you need to file a business insurance claim, contact the insurance company immediately. Also, report the incident to the local police if theft or vandalism of property is involved. If loss is the result of a natural disaster, protect your property from further damage. During the claim process, you will need to obtain at least two bids on what it would cost to repair or replace damaged or lost property. When you file a claim, you will be required to show the business income being earned both before and after the loss. Keep careful records of all expenses related to temporary relocation of your business if that's the case. If you must close your business during the time it takes to make repairs, itemize business expenses that continue even while the business is closed.
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