Commercial Property Insurance | AAMI (2024)

FAQs

Is commercial insurance difficult? ›

Unfortunately for business owners, California has one of the worst commercial insurance markets in the United States. Policy premiums are increasing at a rapid rate, policies are being non-renewed, and more properties are moving over to the California FAIR Plan than ever before.

Business interruption, extra expense, and loss of rents and rental value are the most common time element coverages.

Commercial property insurance protects your company's physical assets from fire, explosions, burst pipes, storms, theft and vandalism. Earthquakes and floods typically aren't covered by commercial property insurance, unless those perils are added to the policy.

Typically, insurance premiums for commercial properties are set by multiplying the value of the building and its contents by a value that correlates to level of risk. Most of the time, properties with high risk have higher property insurance rates, while lower risk properties cost less to insure.

Unfortunately, insurance companies are notorious for using complicated verbiage that is nearly impossible for policyholders to understand what is covered and excluded. Insurance companies are aware that policyholders don't understand the complex and lengthy legal text packed into policy pages.

The most widely used ISO CP coverage forms are the Building and Personal Property Coverage Form (CP 00 10) and the Business Income (and Extra Expense) Coverage Form (CP 00 30).

Commercial package policies can't include certain items like workers' compensation or directors-and-officers insurance. Workers' compensation insurance is required by law and must be purchased as a separate policy. Directors-and-officers policies are necessary for non-profit organizations.

There are three types of property insurance coverage: replacement cost, actual cash value, and extended replacement costs. Replacement cost covers the cost of repairing or replacing property at the same or equal value. The coverage is based on replacement cost values rather than the cash value of items.

Highly valued items, such as jewelry, fine art, and collectibles, are often excluded from a typical policy for replacement costs. In addition, damage from certain weather events, like floods or earthquakes, usually requires you to purchase additional home insurance. Be sure to check your liability coverage.

What is the standard deductible in a commercial property policy? ›

The standard commercial property insurance deductible is $250. However, other deductible amounts are available and the deductible applies only once per loss.

A loss limit is a property insurance limit that is less than the total property values at risk but high enough to cover the total property values actually exposed to damage in a single loss occurrence.

Essential Formulas Used in the Income Approach:

Net Operating Income (NOI) = Potential Income – Operating Expenses. Capitalization Rate (Cap Rate) = Net Operating Income / Property Value. Value = Net Operating Income / Capitalization Rate.

The continued impact of catastrophic events is a major factor driving up costs, along with the increasing cost of capital, financial market volatility and inflation. This is an expense carriers need to pass along to customers.

On average, an insurance policy that offers coverage for up to $2 million can cost about $30 a month in premiums.

Selling insurance can be a lucrative proposition, with relatively high-paying commissions and a high degree of autonomy with flexible work hours. However, it is not an easy job. You can expect a high rate of customer rejection, stress, and attrition rate.

Dealing with rejection is one of the most complex challenges of being an insurance agent. Remember that not every prospect will say yes, but you should keep going. Stay positive and focus on the prospects that are interested in what you have to offer.

The continued impact of catastrophic events is a major factor driving up costs, along with the increasing cost of capital, financial market volatility and inflation. This is an expense carriers need to pass along to customers.

Business insurance rates are based on a narrow set of information that is available on your credit report and business insurance companies are allowed to use only those specific types of information from your credit report.