Two things always go together when we talk about commercial property insurance— buildings and contents. They represent the future of your business and significant loss of either one would be a major setback. Some things are irreplaceable, especially on the contents side, but you need to be covered at a realistic replacement cost and not just what you paid for it.

Then there is time. Time lost and time unable to do what you do for a living, as well as paying the people who work for you, whether a staff of one or two, dozens or hundreds. If you lose a building where business is conducted to fire, for example, there is going to be down time while you move to temporary quarters and, of course, to rebuild or repair.

There is coverage to help you through a difficult transition that may otherwise severely cripple a business owner financially. It anticipates, believe it or not, the replacement cost of your time and that of your employees.

It is up to an agent, working with an underwriter, to customize your business coverage. No two businesses are exactly alike, even if they do the same thing, so everyone needs to be customized to some extent.

Technology has changed the way we do business. Paper records have been replaced digitally and can be backed up continually off the premises. The computerized equipment that creates the records may be destroyed, but the records are still there to be accessed. Then there is the mobile equipment that leaves the premises of a business, such as laptops employees use to work from home or on business trips. That too has to be covered whether damage occurs in the employee’s home or a hotel room.

So this all adds up to two types of coverage on commercial property:

  • Direct Damage Coverage that pays for the damage from a covered cause of loss, whether it is fire or flooding, or “the cost of its repair or replacement.”
  • Time Element Coverage pays for “loss of income or increase in expenses that results from the property damage.”

The challenge in underwriting commercial properties are the ITV, or insurance-to-value, calculations. This is important, not only in paying out fair claims based on accurate values, but in making sure the insurer is charging enough in premiums to cover the risk being assumed.

It is natural to want to keep premiums as affordable as possible, for fear of losing a policyholder, and they too often settle for automatic renewal of the same premiums without seriously analyzing new data. Independent agents have an advantage here for the obviously reason. They have more insurers, or carriers, and therefore more coverage options.

Underwriters need to reassess their ITV calculations with every renewal instead of automatically rolling everything forward for another 12 months.

The agent needs to be able to articulate to the client what the underwriter has determined and why the premiums justify the risk. It is always a challenge, because nobody who owns a business expects destruction or damage to his property, but she or he can’t afford the loss without the right coverage.