How are Commercial Property Insurance Premiums Calculated?

Commercial property insurance is designed to protect business’ physical assets in case of loss or danger. There are many ways in which the cost for commercial property insurance is calculated. No one business is the same, and your business’ premiums may not be the same as the business across the street.

The primary way insurance providers calculate your commercial property insurance premiums is through your building’s value and contents and your level of risk. 

Value of the Business Property 

The replacement cost value of your business’ building is generally calculated based on the value per square foot. You can find the replacement cost value of the building by consulting local builders and your insurance agent. More expensive buildings, such as those with large amenities like pools and kitchens, typically cost more to insure because they will cost more to replace. 

The items inside the building matter, as well. As a businessowner, you will want to insure your business’ important physical assets, like work equipment, in case of disaster so that you can easily replace these items without a hitch in your business’ operation. 

Level of Risk 

Insurance providers want to know how likely you are to file a claim so they can offset the risk through higher premiums. Risks includes your area’s frequency of natural disasters, crime rate, number of commercial property claims in the area and more. For example, if your business is located near the coast where tropical storms and hurricanes are common, you will likely pay more for insurance than an identical business further away from the coast. 

There is nothing you can do to stop natural disasters from occurring, but you can safeguard your business in order to hopefully prevent a claim and save money. It’s recommended that your business’ buildings have burglar alarms, fire alarms, fire extinguishers, reinforced doors and security when necessary. You may also choose to upgrade the building’s roof to be more storm resistant. 

If you have any questions about how your business’ commercial property insurance is calculated, be sure to ask your insurance agent. There may be ways to save money on this insurance, such as having good credit, not filing claims for a certain amount of time, and other qualifying discounts. Purchasing lower limits of commercial property insurance can save you money, but it can also mean leaving you open to paying for huge repairs out of pocket.