What Does Commercial Property Insurance Cover? | Michigan Business Guide

What Does Commercial Property Insurance Cover? | Michigan Business Guide

Commercial property insurance is one of the most important protections your business can have. It safeguards the physical assets your company depends on, whether that’s the building you own, the equipment inside it, or the inventory you sell.

But what exactly does it cover—and what does it not? Let’s break it down.

Core Coverages

• Building Coverage – If you own your building, commercial property insurance helps protect it against damages caused by covered events like fire, vandalism, theft, or certain weather-related losses.
• Business Personal Property Coverage – This protects the contents of your property: equipment, furniture, computers, inventory, and even outdoor signage in many cases.

Common Covered Events

Most standard commercial property policies cover damage caused by:

• Fire
• Theft
• Vandalism
• Certain types of weather (like wind or hail)

However, it’s important to note that flood and earthquake damage are not usually included in a standard policy. Businesses in higher-risk areas may need to purchase separate policies or endorsements for these events.

Additional Coverages to Consider

• Equipment Breakdown Coverage – Helps with the repair or replacement costs if critical machinery or systems fail.
• Ordinance or Law Coverage – Especially important for older buildings, this helps cover expenses related to bringing a building up to current code after a covered loss.
• Utility Service Line Interruption Coverage – Protects against losses if damaged utility lines disrupt your operations.
• Business Interruption Coverage – Often included as part of commercial property insurance, this helps replace lost income if your business is forced to temporarily shut down after a covered event.
• Tenant Improvements and Betterments Coverage – If you lease your business space and invest in upgrades such as new flooring, lighting, or built-in shelving, this coverage helps protect those improvements you’ve made to the property.

Replacement Cost vs. Actual Cash Value

One of the most important details in your policy is how your property is valued:

• Replacement Cost: Pays to replace damaged property at today’s prices, without factoring in depreciation.
• Actual Cash Value (ACV): Pays based on the property’s age and condition, which can mean a smaller payout.

In most cases, replacement cost provides stronger protection, and many businesses choose this option if available.

Why It Matters

Every business has unique risks, and coverage details vary by insurance company and policy. Commercial property insurance isn’t just about protecting a building—it’s about ensuring your business can recover and continue operating after an unexpected event.

If you own a business property in Michigan, make sure your coverage fits your needs. Working with an experienced insurance agent can help you understand your options and secure the right protection.