Special, Basic, and Broad Forms for Commercial Property Insurance

The Importance of Commercial Property Insurance

You can change your product, pricing, and promotional strategy to make your business stand out from the competition. But you can’t outcompete or dodge emergencies like fires, natural disasters, and robberies to protect your business. All you can do is be prepared.

Commercial property insurance is the best preparation for your business against these worst-case scenarios. It gives you the financial cushioning you need to keep your business going without being swallowed up by debt.

You may need to renovate and relocate your store for weeks or months based on the damage. If you do not have insurance coverage for these costs, you may end up going out of business.  This is especially true if there’s large-scale property damage.

Exploring Different Commercial Property Insurance Policy Types

What is commercial property insurance? It’s a contract between your business and the insurance company to cover any property damages that are listed in your policy coverage. You can get commercial property insurance even if you don’t own the property.

Your insurance premiums depend on a variety of factors such as:

•       Business property value
•       Assets
•       Business location
•       Construction of the building
•       Anti-theft measures and fire safety protection
•       Your industry

Most insurance companies generally cover damages from theft, vandalism, fire, lightning, rain, snow, earthquakes, and tornadoes. You need to evaluate the level of coverage your business needs before purchasing your policy.

Here are the three forms of primary commercial property insurance:

•       Basic – for small businesses with minimal infrastructure risk
•       Broad – for businesses facing moderate risk
•       Special – for businesses with a lot of expensive infrastructure and assets facing high-risk

It’s important to do your research and spend enough time with your insurance agent before purchasing commercial property insurance. Clear any doubts you have about your policy conditions and how they influence coverage and protection in different circumstances. 

First, think about all the worst-case scenarios your business could face in your location. Now ask your agent about your policy inclusions and exclusions, and how the claims process would work for each case.

A Closer Look at Basic, Broad, and Special Forms

Basic Form – This is the most limited form of commercial property insurance suited for business owners with a low-risk profile. The basic form policy only covers the perils named explicitly in your policy. That’s why it’s often referred to as “named perils coverage.”

Here are some of the specific perils listed in your basic form policy:

•       Fire damage
•       Lightning
•       Hailstones
•       Wind damage
•       Explosion
•       Smoke
•       Vandalism
•       Vehicle crashes
•       Riots
•       Sinkhole collapse
•       Volcanic eruption

It is the most cost-effective policy, but it excludes many other dangerous scenarios that could paralyze your business. You won’t get any insurance compensation if the cause isn’t listed in your policy.

Broad Form – It includes all the perils listed in your basic form insurance and more. But please note that insurance adjusters can sometimes find technicalities to dismiss your claim even if the cause of damage is similar to the named perils listed above.

Here are some of the additional perils covered by broad-form insurance:

• Falling objects
• Weight of snow
• Pipe freezing
• Accidental water discharge

Broad form coverage is slightly more expensive than basic form insurance because it does provide more comprehensive coverage. However, it still doesn’t protect you from all possible causes of damage.

Special Form – Known as the all-risk coverage, it covers almost every peril unless it’s specifically removed or excluded from your policy. It covers all the perils listed in your basic-form and broad-form insurance along with a few more. For instance, it can cover any damages caused by your property’s drainage system or equipment breakdown.

Frequently Asked Questions

What is the primary purpose of commercial property insurance?

What are the key differences between Basic, Broad, and Special Forms?

Are there additional coverage options beyond these forms?

Can businesses customize their commercial property insurance policies?

Why might a business choose a more limited coverage form?

How can a business assess its risk level to select the appropriate form?

What external risks should businesses consider when choosing coverage?

Can a business upgrade its coverage as its risk profile changes?

What steps should a business take to review and understand policy conditions?