In Texas, commercial property policies are not standardized. Insurers must comply with minimum requirements but have a great deal of flexibility to develop their own policies. As a result, coverages and policy terms may vary significantly by insurer and by policy.
Commercial multi-peril (CMP) policies combine multiple coverages, such as commercial property, liability, inland marine, and commercial auto, to ensure full protection within the convenience of a single policy. CMP policies typically have lower premiums than purchasing the coverages individually.
Business owner program (BOP) policies are a common type of commercial multi-peril policy primarily for small businesses. BOP policies combine property and liability coverage in one policy.
Commercial property policies provide various types of coverage, either as part of the base policy or through policy “endorsements.” Endorsements expand or amend a policy’s coverages and usually increase your premium. You can buy certain coverages as separate stand-alone policies.
Following are some typical commercial property coverages:
- Building occupied by the insured coverage insures a building that you regularly use but do not own. This coverage can be important if you lease or borrow a building that is critical for your operations.
- Newly acquired or constructed buildings coverage insures a new building if you add it to your policy within a specified amount of time. If you don’t notify your insurer within the time period - usually 30 days - your policy won’t cover the new building. Commercial property policies generally only cover buildings named in the policy.
- Employees’ personal property coverage insures your employee’s personal property against covered losses if the property is on your premises. Generally, you must buy this coverage as an endorsement if you need more than a limited amount.
- Off-premises property coverage covers your property located off site. Some policies might not cover off-premises property, or may provide only limited coverage. You can usually buy an endorsement to cover off-premises property. If you can’t buy an endorsement, you may have to buy a separate policy.
- Business interruption coverage pays for actual or projected lost income if loss from a covered peril prevents normal business operations.
- Extra expense coverage pays any additional costs to expedite resumption of your operations after a covered loss.
- Valuable papers coverage provides limited coverage of your business records and other essential information. You may be able to buy an endorsement to increase this coverage.
- Ordinance or law coverage pays any additional costs required to repair or rebuild a facility damaged by a covered peril in order to comply with current building codes. Many policies provide limited ordinance coverage, but you can increase it with an endorsement.
- Boiler and machinery coverage covers boilers, air conditioning units, compressors, steam cookers, electric water heaters, and similar machinery. Coverage generally extends to machinery specifically listed in the policy and to any subsequent losses, such as when a boiler explosion or water heater leak causes damage to other property. You can usually purchase this coverage as either an endorsement or a separate policy.
- Inland marine coverage insures goods in transit over land, by air, or by inland waterways. It also covers projects under construction and transportation and communications structures, such as bridges, tunnels, and communications towers.
Authored by Texas Department of Insurance
