Your client, Anna, comes to you and describes the wonderful office building she recently acquired. As she is telling you about her new purchase, she explains that it is a charming small office building right in the heart of downtown—and of course she got a great deal! She already has the building fully occupied by three different businesses. The three businesses are a dental office in the rear half of the building, an upscale boutique in the front half of the building, and an accounting firm’s office on the second level.  Anna also has a small portion of the upstairs area designated as her office.

Anna goes on to explain how she updated the building before her tenants moved in, and she also added a security system.  She wants to make sure her property is covered in the case of a fire or tornado. Ahhh, but that’s the easy part.  What other coverages should you make her aware of to protect this important asset? 

Coverage Enhancements That Should Be Considered

The standard property and general liability policy that you provide Anna with will cover her for everything from the fire and tornado that she was initially concerned with to the cost of litigation in situations where she is deemed liable for a slip and fall accident.  But here are a few additional coverages that are important to recommend as well.

1. Equipment Breakdown Coverage – Pays for direct physical damage to covered property that is a direct result of fortuitous loss to the covered equipment caused by mechanical and electrical breakdown.

   Example: A compressor used for cooling Anna’s building has a mechanical breakdown. When Equipment Breakdown Coverage has been added to the policy, coverage is afforded for the repair of the compressor.

2. Business Income & Extra Expense Coverage – Pays for the loss of Business Income including rental value sustained due to the suspension of operations during the period of restoration after a covered loss.

   Example:  A fire damages Anna’s building and as a result, none of the tenants can operate their businesses in Anna’s building and her rental income would be lost.  Business Income & Extra Expense Coverage will pay the rental income lost by Anna as a result of the fire up to the applicable limit of insurance. 

3. Outdoor Sign Coverage – Signage is expensive, and it’s important for your policyholders to know that a very limited amount of coverage is provided for signs on an unendorsed property policy (whether the sign is attached to the building or free standing).
   Example:  The same fire that damages Anna’s building also destroys a free standing sign valued at $20,000.  An unendorsed policy would only provide $1,000 of coverage; however, since you recommended that Anna endorse her policy for sign coverage, she is fully insured for the loss. 

There are many other coverage enhancements to be aware of as well.  In Part 2 of this blog series, we’ll share a few more.  In the meantime, we suggest you take a look at Pekin Insurance’s Commercial Property Enhancement endorsement which helps to fill the gap on 52 property coverages. 

Is there a coverage enhancement you would recommend or have a question about?  Tell us about it.