Commercial Property Insurance Explained

Commercial Property Insurance Explained

Definition: A commercial property insurance policy is for businesses and other organizations that insure against damage to their buildings and contents due to a covered cause of loss, such as a fire, flood, earthquake & wind. The policy may also cover loss of income or increases in expenses that result from the property damage (PD). Commercial property insurance policies may be written on a named perils or all perils or all-risk basis.

Named Perils – a commercial property insurance term referring to policies that provide coverage only for loss caused by the perils specifically listed as covered. It contrasts with all risks coverage, which applies to loss from all causes not specifically listed as excluded. What’s The Difference Between Named Perils Vs. All Perils Commercial Property Insurance?

Vs.

All Perils or All Risk- commercial property insurance covering loss arising from any fortuitous cause except those that are specifically excluded. This is in contrast to named perils coverage, which applies only to loss arising out of causes that are listed as covered.

As you can see there is a significant difference between, but ironically a named perils policy that covers perils/risks excluded by an All Risk/All Perils policy could in fact provide broader coverage.

It should be noted that many industry practitioners continue to use the term “all risks” to describe this approach to defining covered causes of loss in a property insurance policy, it is not often used in insurance policies because of concern that the word “all” suggests coverage that is broader than it actually is. Because of this concern, some industry practitioners have begun to use the term “open perils” or instead of all risks or all perils.

There are many subtle, but important differences between commercial property insurance policies.  It is important for every organization to have a full understanding of how they function, what’s covered and what’s excluded.