Common Exclusions in Commercial Property Insurance (What You Need To Know)

Common Exclusions in Commercial Property Insurance (What You Need To Know)

When you buy commercial property insurance in Michigan, it’s easy to assume your business is covered for every possible situation. The reality, though, is that every policy has exclusions—specific risks and types of damage that are not covered. Knowing these exclusions ahead of time can help you avoid surprises at claim time and make sure you have the right supplemental coverages in place.

Below are some of the most common exclusions found in Michigan commercial property insurance policies.

1. Flood Damage

Damage caused by flooding is one of the most common exclusions in commercial property policies.
If your business is in a flood-prone area, you’ll need to either:

• Add a flood coverage endorsement (if available), or
• Purchase a separate flood insurance policy.

Without it, any damage caused by rising water, storm surges, or heavy rain overflowing into your building will not be covered.

2. Earthquake Damage

Just like floods, earthquakes are usually not covered by a standard property policy. If you want protection, you’ll need to purchase specific earthquake coverage or a separate policy altogether.

While Michigan isn’t known for frequent earthquakes, this can still be a concern for businesses with properties in higher-risk regions or with out-of-state holdings.

3. Wear and Tear

Insurance is designed to protect against sudden, accidental events—not normal aging. Issues like:

• General wear and tear
• Deterioration over time
• Maintenance-related problems

These are excluded.

For example, if your roof simply wears out due to age, your policy won’t cover replacement. Preventive maintenance and budgeting for upgrades are key.

4. Pollution and Environmental Hazards

Standard commercial property insurance does not cover pollution or environmental damage. If your business operations involve hazardous materials or you’re at risk of contamination, you’ll need a separate environmental liability policy. This can be crucial for manufacturers, contractors, and certain industrial businesses.

5. Mechanical and Equipment Breakdowns

If your HVAC system fails or a piece of machinery breaks down, a standard property policy won’t cover the cost of repairs or replacement. To address this, you’ll want to consider equipment breakdown coverage, which can be added as an endorsement.

Similarly, losses caused by utility service interruptions (like power outages) are excluded unless you purchase specific utility service interruption coverage.

6. Certain Natural and Intentional Events

There are exclusions for events considered too catastrophic or intentional, such as:

• War
• Terrorism
• Nuclear hazards
• Fraud or intentional damage

These are universally excluded from commercial property insurance and are either uninsurable or require specialized coverage or endorsements.

Why Knowing Exclusions Matters

Understanding these exclusions isn’t about finding flaws in your insurance—it’s about making sure you have a complete risk management plan. For many businesses, this means supplementing your property insurance with:

• Flood or earthquake policies
• Environmental liability insurance
• Equipment breakdown coverage
• Utility service interruption coverage

By being proactive, you can close the gaps and make sure your business is fully protected.

Final Thoughts

Commercial property insurance is vital for Michigan businesses, but no policy covers everything. Knowing what’s excluded allows you to make informed decisions, reduce your risk exposure, and ensure your business is protected against the unexpected.

If you’re unsure whether your current coverage leaves you exposed, it may be worth reviewing your policy with a commercial insurance professional.