Commercial property policies in Texas generally fall into one of three categories:
Basic form Policies typically cover common risks or perils, such as damage caused by fire, lightning, vehicles, aircraft, or civil commotion. Most basic form policies also cover damage from windstorms, except in counties on the Texas coast, where businesses will likely need to purchase a separate policy for windstorm protection.
Broad form Policies typically cover common risks or perils, such as damage caused by fire, lightning, vehicles, aircraft, or civil commotion. Most basic form policies also cover damage from windstorms, except in counties on the Texas coast, where businesses will likely need to purchase a separate policy for windstorm protection.
Special form Policies cover against all types of losses except those specifically excluded by the policy. Common special form exclusions include losses resulting from flood, earth movement, war, terrorism, nuclear disaster, wear and tear, and insects and vermin.
Many business owners buy additional coverages. Some are available as separate policies, and others are available as endorsements, or “riders,” that enhance or amend a policy’s base coverage. Generally, adding endorsements to a policy will increase your premium. Ask your agent about these additional coverages:
- Liability insurance against the cost of lawsuits and possible court judgments.
- Business interruption coverage Pays for actual or projected income lost when a covered peril prevents normal business operations. Coverage forms can be added to a commercial property policy that provide only business income coverage, only extra expense coverage, or a combination of both in the same form.
- Extra expense coverage Pays any added costs a business may incur resulting from the need to expedite the return to operations after a covered loss.
- Building occupied by the insured Covers a building that the insured regularly uses but does not own. This endorsement can be important if a business leases or borrows a building that’s critical for operations.
- Newly acquired or constructed buildings Most commercial property policies allow the insured to add newly acquired property to their policies within a certain time period. If the insurance company is not notified within the time period, typically 30 days, the coverage will not apply. Commercial property policies generally only cover buildings named in the policy.
- Property off premises Property located within a covered structure is generally covered by a base policy. Damage to property located off premises may not be covered, or may only be covered to a limited extent. Coverage for off-premises property can often be purchased as an endorsement to the base policy or as a stand-alone policy.
- Personal property of employees while at insured premises Generally only property owned by the insured entity is covered, unless this endorsement is added. A coverage extension in the base policy might provide a limited amount of coverage for personal effects and property of others.
- Valuable papers coverage Assigns a value to records or other essential information that could be lost. Papers are typically covered only to a limited extent by the base policy.
- Ordinance or law coverage Provides an additional amount to cover the increased cost of construction necessary to comply with building codes that might be triggered after a covered loss damages the insured property. This coverage can be added by endorsement, but the base policy might contain a limited benefit.
- Boiler and machinery coverage Boilers, air conditioning units, compressors, steam cookers, and electric water heaters are examples of machinery typically covered by this endorsement. Coverage generally extends to specifically listed machinery and any subsequent losses that result, such as when a boiler explosion or water heater leak causes damage to other property. This coverage may also often be purchased as a separate stand-alone policy.
Coverage against crimes
There are several types of policies that can protect a business from losses resulting from crime. Policies may be issued on a “loss sustained” or “discovery” basis. Loss sustained coverage pays for losses that occur during the policy period, while discovery coverage pays for losses that occur at any time. Both types require that losses be discovered during the policy period or extended reporting period. Common crime coverages include:
- Loss of glass and money due to theft pays for damage to glass and any loss of money resulting from a break-in.
- Robbery and safe burglary, property other than money is a more limited form of coverage that does not include money or securities.
- Forgery or alteration protects a business against forgery or alteration of checks, drafts, promissory notes, or other directions to pay.
- Theft, disappearance, and destruction coverage coverage insures money, securities, and other property against loss, both on premises or in the custody of an employee or messenger while off premises
Commercial multi-peril policies
- Commercial multi-peril (CMP) policies combine one or more coverage forms, such as commercial property, general liability, inland marine, crime, or commercial auto, in a single policy. A business owner could add other types of coverage to ensure full protection within the convenience of a single policy.
- Business owner programs (BOPS) are a common form of commercial multi-peril policy. BOP policies are tailored to the needs of small-business owners and combine property and liability coverage in one policy.
- Texas Flood Insurance Some companies may include flood coverage in their commercial property policies for areas with a low flood risk. However, most flood insurance in the United States is administered by the National Flood Insurance Program (NFIP).