The Worst Advice You Can Hear About Commercial Property Insurance
After decades in the insurance industry, we’ve heard it all—and we know that when it comes to securing commercial property insurance, misinformation can lead to costly mistakes and inadequate coverage. That’s why we wanted to share some of the worst pieces of advice you might encounter. Here’s what you shouldn’t believe:
#1: The cheapest policy is best
Why It's Bad: While saving money is important, the cheapest policy often comes with the least coverage. For example, if you have a building that would cost $3 million to rebuild and the cheap policy only covers $2 million, you’re responsible for the rest of the cost. Cheaper policies also often have insurance exclusions that can leave you vulnerable. Policies with inadequate coverage limits or extensive exclusions are usually offered at a cheaper rate but can leave significant gaps in protection.
#2: You only need the bare minimum coverage
Why It's Bad: Minimal coverage may satisfy legal requirements, but it often doesn’t provide sufficient protection for your property and assets. For example, a policy without ordinance and law coverage can cause significant issues if you have a claim and the city requires you to upgrade your building or demolish undamaged parts of it. Many additional coverages like these cost next to nothing but can help protect you from high out-of-pocket costs during a claim. On the other hand, bare minimum coverage could jeopardize your business’s financial stability.
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#3: You don’t need flood insurance
Why It's Bad: Many people hear that flood insurance is unnecessary unless you’re in a high-risk area. But floods can occur anywhere, not just in high-risk zones. Unfortunately, flooding is becoming more common in areas previously considered low-risk. Many standard commercial property insurance policies do not cover flood damage. We frequently hear that you only need flood insurance if your bank requires it. However, it’s wise to purchase flood insurance based on your actual risk, not just bank requirements, to safeguard your business from unexpected flooding events.
#4: You can “set it and forget it”
Why It’s Bad: Nearly every business changes over time. Small businesses grow, add employees, expand to new locations, renovate stores and offices, and buy more expensive equipment. In the world of insurance, these are all significant events that could change the types of commercial property insurance you need and the level of coverage required to fully protect your business. Most brokers recommend you review your policy at least once a year, if not more often, depending on your property and business. At the least, use your annual renewal notice as a reminder to consider what’s changed in your business lately.
#5: You don’t need to insure vacant properties
Why It’s Bad: It’s tempting for vacant property owners to leave this expense off the list. After all, vacant properties are already costing you money, and what’s the worst that could happen? The answer is that vacant buildings can actually be more hazardous than occupied ones. Theft, vandalism, and maintenance issues that go unnoticed until they cause major damage can all be big problems in these properties. Plus, there’s no tenant with an insurance policy that could back you up. Vacant commercial property insurance is a must for these situations.
#6: Personal property insurance covers your business assets
Why It's Bad: Personal property insurance is designed for individual use, not for business assets. Most personal policies explicitly exclude commercial uses for property. It’s essential to know exactly what your personal insurance policy says about using a home or personally insured property for business purposes. Commercial property insurance is specifically tailored to protect your business assets, so you can be sure you have the appropriate coverage limits and policy terms.
#7: It’s OK to wait to file your claim
Why It’s Bad: Some insurers will refuse to pay if you don’t file your commercial property claim within a certain amount of time. Even if that isn’t the case, it’s important to contact your insurer immediately after an incident. Your memory will be fresh, so you can be sure of what happened and when. And the faster the insurance adjuster can get there to assess the damage, the more accurate they’ll be. One more thing: Never make repairs without contacting your insurer, either. While it’s typically fine to proceed with emergency repairs like covering up broken windows or stopping water leaks, you should still notify them you have a property damage claim first.
#8: All insurance companies are the same
Why It's Bad: Insurance companies vary significantly in terms of coverage options, customer service, claims processing, and financial stability. Just like car manufacturers or other products, the spec sheets might look similar, but the quality can vary greatly. Some insurance companies offer lower premiums by cutting costs on customer support and denying claims more frequently. Be sure to research and choose an insurer with a strong reputation and the right policy offerings for your business needs. Assuming all insurance companies are the same can result in inadequate coverage and poor claims experiences – and that can hurt the business you worked so hard to build.
Get better insurance advice from LandesBlosch
Navigating commercial property insurance can be complex, and relying on bad advice can lead to significant financial exposure. It’s crucial to seek out accurate, reliable information and work with experienced insurance professionals who can tailor coverage to your business’s unique needs. LandesBlosch has helped businesses find the right coverage at the right price for more than a century, and we’re ready to help you, too. Contact us today so you’re prepared for tomorrow.
About The Author: Austin Landes, CIC
Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.