Key Takeaways
- Commercial property insurance protects business buildings, contents, business income, and equipment
- Coinsurance clauses require adequate coverage (typically 80%, 90%, or 100%) to avoid payment penalties
- Business income coverage pays for lost profits and continuing expenses during covered property losses
- Maryland commercial properties must consider flood, windstorm, and earthquake exposures
- The Business Owners Policy (BOP) bundles property and liability for small to medium businesses
Maryland Commercial Property Insurance
Maryland businesses need comprehensive property insurance to protect their operations, assets, and income.
Commercial Property Coverage Forms
Building and Personal Property Coverage Form (BPP)
| Coverage Category | What's Covered |
|---|---|
| Building | Owned structures, permanently installed fixtures, machinery, outdoor fixtures |
| Business Personal Property | Furniture, equipment, inventory, supplies, improvements to leased space |
| Personal Property of Others | Customer property in insured's care, custody, or control |
Covered Causes of Loss Forms
| Form | Coverage Level | Perils Covered |
|---|---|---|
| Basic | Minimum | Fire, lightning, explosion, windstorm, hail, smoke, aircraft, vehicles, riot, vandalism, sprinkler leakage, sinkhole |
| Broad | Moderate | Basic perils + falling objects, weight of ice/snow, water damage, collapse |
| Special | Maximum | All perils unless specifically excluded |
Business Income Coverage
What It Pays
Business income coverage compensates for:
- Net Income Loss: Profits that would have been earned
- Continuing Expenses: Fixed costs that continue during suspension (rent, utilities, loan payments)
- Extra Expense: Additional costs to minimize business interruption
- Extended Period: Recovery time after physical restoration
Coverage Period
| Phase | Duration |
|---|---|
| Period of Restoration | Begins 72 hours after loss (typically) |
| Ends | When property should be repaired with due diligence |
| Extended Period | Additional 30-365 days for customer return |
Coinsurance in Commercial Property
How Coinsurance Works
Coinsurance requires policyholders to carry insurance equal to a specified percentage of property value.
Formula:
Coinsurance Example
| Factor | Amount |
|---|---|
| Building Value | $1,000,000 |
| Coinsurance % | 80% |
| Insurance Required | $800,000 |
| Insurance Carried | $600,000 |
| Loss Amount | $200,000 |
Calculation:
- ($600,000 / $800,000) × $200,000 = $150,000 payment
- Policyholder bears $50,000 as coinsurance penalty
Maryland-Specific Commercial Considerations
Flood Exposure
Many Maryland businesses face flood risk:
- Chesapeake Bay coastal areas
- Baltimore inner harbor
- River and stream flood zones
- Urban drainage flooding
Commercial flood insurance is available through:
- National Flood Insurance Program (NFIP)
- Private flood insurance markets
- Excess flood coverage
Windstorm and Coastal Risks
Eastern Shore and coastal businesses should consider:
- Higher windstorm deductibles in coastal zones
- Named storm exclusions in some policies
- Maryland Beach and Waterfront Association coverage
Business Owners Policy (BOP)
Ideal for Small to Medium Businesses
The BOP packages property and liability coverage:
| Coverage | Included |
|---|---|
| Building | Yes |
| Business Personal Property | Yes |
| Business Income | Yes |
| Extra Expense | Yes |
| General Liability | Yes |
| Medical Payments | Yes |
Eligible Businesses
- Retail stores
- Offices
- Restaurants (limited cooking)
- Wholesale distributors
- Service businesses
Exam Tip: Coinsurance penalties apply when businesses carry less insurance than the required percentage of property value. Always verify the coinsurance requirement (80%, 90%, or 100%) and insure to that level to avoid becoming a co-insurer on losses.
A Maryland business has a building worth $500,000 with an 80% coinsurance clause but only carries $300,000 in coverage. If they suffer a $100,000 loss, how much will the insurance pay (ignoring deductible)?
What does business income coverage pay for during a covered property loss?
Which causes of loss form provides the broadest coverage for commercial property?