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Commercial real estate comprises structures and spaces intended for business and generating income. Investing in commercial real estate offers benefits such as a high potential for earning a steady income and capital appreciation as time goes by.
In some cases, business owners own the commercial property or space and use it as their office, storage space, store, etc. Most of the time, however, investors in a commercial property lease the area and collect rent from businesses that operate there.
For each type of investor, there is a corresponding type of commercial investment property insurance.
In a nutshell, commercial investment property insurance is designed for commercial property owners who want to protect themselves from various sources of financial loss. This guide covers everything you need to know about commercial property insurance.
Let’s begin!
Examples of Commercial Property
Commercial properties are structures and spaces that are intended for generating income or serve as a business location. These differ from residential properties that primarily serve as living spaces. However, residential spaces that are predominantly intended for generating income (e.g. apartment buildings) are still considered commercial property.
Other examples of commercial properties include the following:
- Malls
- Retail buildings
- Office spaces
- Industrial structures
- Warehouses
- Mixed-use buildings
Pros of Investing in Commercial Property
- Commercial properties command higher rental fees.
- Businesses that invest in their own commercial properties will no longer need to spend on rent.
- Commercial properties tend to involve longer lease contracts.
- Being a landlord of a commercial property means that tenant relationships are more professional in nature — which is likely to result in more efficient communication.
- Businesses that rent commercial properties are more likely to meticulously care for the property as its condition reflects the company image.
Cons of Investing in Commercial Property
- Commercial properties tend to have higher prices.
- Professional maintenance and repairs could be more costly compared to residential properties.
- These locations tend to cater to more foot traffic; hence an increased likelihood of accidents occuring.
Types of Commercial Investment Property Insurance
Investing in commercial properties can take on various forms. An “investor” in a commercial property or commercial space could be any of these three:
- A business owner intending to use the space for business operations;
- A direct investor intending to lease the commercial property; and
- An indirect investor who buys marketable securities connected to commercial property.
Commercial investment property insurance can protect business owners who own commercial property and direct investors (i.e. landlords) that intend to lease the space to businesses. However, there is a specialized type of commercial investment property insurance for each kind of investor.
1. Commercial Property Insurance for Business Owners
Commercial property insurance is one of the most important types of insurance policies for businesses with a physical location. This applies whether the company owns or rents the commercial space. In both cases, commercial property insurance can be customized based on the needs of the business.
Commercial property insurance does more than account for the repair/replacement costs tied to covered perils like disasters, fires, and burglaries. This type of insurance will also cover lost income in connection with downtime because of the following:
- Property damage and subsequent unusability;
- Property inaccessibility; and
- Theft of covered equipment and important documents.
2. Landlord Insurance for Direct Investors in Commercial Property
Many direct investors in commercial property have the intention to lease the space. This makes them commercial landlords. Commercial landlords can be sole proprietors, partnerships, or companies.
Even if a landlord entity opts to hire people for managing the commercial rental property (thereby making them less directly involved with the property), they are still in need of landlord insurance.
The full scope of coverage of landlord insurance includes the following:
- Property damage due to fires, tenant accidents, covered disasters, vandalism, and so on;
- Theft of equipment used for the maintenance of the commercial rental property;
- Legal liabilities connected to landlord negligence; and
- Lost income coverage if the commercial property becomes inaccessible or unusable due to covered perils.
Though there are many similarities between landlord insurance and commercial property insurance, landlord insurance is more tailor-fit to the risks faced by commercial landlords.
A Few Examples of Commercial Property Insurance Claims
1. Accidental Fire
Though arson is typically not covered by commercial property insurance, accidental fires are usually included in standard policies. Accidental fires could arise because of faulty wirings, misuse of electrical machines, and so on.
For both landlord insurance and commercial property insurance, a claim relating to accidental fire will trigger coverage for repair costs, which could be up to $4,000 for contained incidents. Both insurance types will also cover the insured’s lost income while the property gets restored.
2. Landlord Negligence Liability
This is a claim that can only be covered by landlord insurance. Landlords can face legal liabilities because of negligence concerning their commercial property. A few examples include stairs that are not well-lit, poorly maintained electricals, and so on. When negligence results in damage or injuries, landlords can face lawsuits. In claims like this, landlord insurance will cover the legal fees and settlements.
3. Theft of Equipment
In case a business with a physical location gets its computers, office appliances, documents, or equipment stolen or vandalized, this claim will be covered by commercial property insurance. This applies whether the business owns the commercial space or not.
As for landlords, landlord insurance will cover the repair/replacement cost of damaged or stolen equipment used for the maintenance of their property.
The above are just a few examples of claims related to commercial property investment insurance. Check out these additional sources:
Get Tailor-Fit Commercial Property Insurance
Looking for customized commercial property insurance to meet all your business needs and preferences? We’re here for you.
KASE Insurance is an award-winning insurance brokerage firm in Toronto. We specialize in providing customized insurance for different kinds of businesses. Whether you’re a commercial landlord or run a company operating within owned space, we can help you get the tailor-fit commercial investment property insurance that you need.
Our dedicated team is here for you every step of the way — from negotiating premiums to following up on commercial property insurance claims. To get started on having worry-free insurance, contact us today or request a FREE quote.
(416) 588 5273 
