Key Takeaways
- Commercial property policies protect business buildings, contents, and business income
- Business income coverage pays for lost income and continuing expenses during suspension
- Coinsurance clauses require businesses to insure to 80-90% of property value to avoid penalties
- DC's urban environment creates unique commercial property exposures
- Business owners policies (BOP) combine property and liability coverage for small businesses
Last updated: January 2026
DC Commercial Property Insurance
Commercial Property Coverage Forms
Building and Personal Property (BPP) Coverage Form
| Coverage | Description | Typical Insureds |
|---|---|---|
| Building | Owned structures, fixtures, permanently installed equipment | Building owners |
| Business Personal Property | Inventory, furniture, equipment, supplies | Tenants and owners |
| Property of Others | Customer property in insured's care, custody, control | Repair shops, storage |
Causes of Loss Forms
| Form | Coverage | Best For |
|---|---|---|
| Basic | Named perils (fire, lightning, explosion, windstorm, etc.) | Minimal coverage, low premium |
| Broad | Basic perils + additional named perils (water damage, collapse) | Moderate coverage |
| Special | Open perils (all risks except excluded) | Comprehensive coverage, preferred |
Business Income Coverage
Business Income (BI) Coverage
Pays for:
- Lost Net Income - Profits that would have been earned
- Continuing Expenses - Rent, utilities, payroll (if continued)
- During Period of Restoration - Until property repaired or business relocated
Business Income Calculation
| Component | Example |
|---|---|
| Gross Earnings | $500,000 annually |
| Less: Non-Continuing Expenses | -$100,000 (can be suspended) |
| Net Income + Continuing Expenses | $400,000 |
| Insured Value | Should insure $400,000+ |
Extra Expense Coverage
Pays for:
- Temporary location rental
- Equipment rental
- Overtime labor costs
- Emergency repairs to minimize loss
- Expediting costs (rush delivery, premium freight)
DC Business Context: Due to high DC commercial rents, business income and extra expense coverage are critical for DC businesses facing interruptions.
Coinsurance in Commercial Property
Coinsurance Clause Purpose
Coinsurance clauses encourage businesses to insure to adequate values:
Common Coinsurance Percentages: 80%, 90%, or 100%
Coinsurance Formula
\text{Recovery} = \frac{\text{Amount of Insurance}}{\text{Value} \times \text{Coinsurance %}} \times \text{Loss}
Coinsurance Example
Scenario:
- Property value: $1,000,000
- Coinsurance requirement: 80%
- Amount insured: $600,000
- Loss: $400,000
Required Insurance: $1,000,000 × 80% = $800,000
Recovery Calculation: \text{Recovery} = \frac{$600{,}000}{$800{,}000} \times $400{,}000 = $300{,}000
Result: Business only recovers $300,000 of the $400,000 loss due to underinsurance.
Exam Tip: Coinsurance penalties apply when the amount of insurance is less than the required percentage of property value. Always insure to at least the coinsurance percentage to avoid penalties.
Business Owners Policy (BOP)
BOP Package Components
| Coverage | Included | Limits |
|---|---|---|
| Building | Yes (if owner-occupied) | Replacement cost |
| Business Personal Property | Yes | Replacement cost |
| Business Income | Yes (with extra expense) | Actual loss sustained |
| General Liability | Yes | $1M per occurrence typical |
| Medical Payments | Yes | $5,000 per person typical |
BOP Eligibility
Designed for small to medium businesses:
- Restaurants (under 7,500 sq ft)
- Retail stores (under 25,000 sq ft)
- Office buildings (under 100,000 sq ft)
- Apartment buildings (under 6 stories)
- Light manufacturing
BOP Advantages
- Simplified Coverage - Package policy easier to understand
- Cost Savings - 15-30% cheaper than separate policies
- Automatic Coverages - Many coverages included automatically
- Streamlined Underwriting - Faster application process
DC Commercial Property Considerations
Urban Environment Challenges
| Challenge | Insurance Impact |
|---|---|
| High Property Values | Adequate limits critical |
| Close Proximity | Fire spreads between buildings |
| Pedestrian Traffic | Increased liability exposures |
| Delivery Access | Loading dock liability |
| Underground Utilities | Water damage, service interruptions |
Special DC Business Types
| Business Type | Special Considerations |
|---|---|
| Restaurants | Equipment breakdown, spoilage, liquor liability |
| Retail Stores | Inventory coverage, employee theft, customer liability |
| Law Firms | E&O liability, document protection, cyber coverage |
| Federal Contractors | Cyber liability, professional liability, surety bonds |
| Nonprofits | Directors & officers liability, volunteer coverage |
| Embassies/Int'l Orgs | Specialized property and liability needs |
Inland Marine Coverage
Commercial Inland Marine Policies
| Coverage | Protects | Example Insureds |
|---|---|---|
| Contractors Equipment | Mobile equipment, tools | Contractors, landscapers |
| Computer Equipment | Computers, servers, electronics | IT firms, offices |
| Accounts Receivable | Records of money owed | All businesses with credit sales |
| Valuable Papers | Documents, blueprints, records | Architects, law firms |
| Signs | Outdoor signs, billboards | Businesses with exterior signage |
| Scheduled Property | Specific high-value items | Jewelry stores, art galleries |
Crime and Employee Theft Coverage
Crime Insurance
Protects against:
- Employee Theft - Stealing of money, securities, property
- Forgery/Alteration - Forged checks, altered documents
- Computer Fraud - Theft via computer
- Funds Transfer Fraud - Unauthorized electronic transfers
- Money Orders/Counterfeit Money - Acceptance of counterfeit currency
Coverage Limits
| Coverage | Typical Limit | Recommendation |
|---|---|---|
| Employee Theft | $25,000 - $250,000 | Based on employee access to funds |
| Forgery | $25,000 - $100,000 | Based on check volume |
| Computer Fraud | $25,000 - $100,000 | Higher for businesses with online transactions |
DC-Specific Requirements and Regulations
Building Code Compliance
DC enforces strict building codes:
- Building code upgrade coverage important
- Ordinance or law coverage endorsement
- Increased cost of construction coverage
- Demolition cost coverage
Accessibility Requirements
DC follows ADA and local accessibility requirements:
- Coverage for accessibility improvements after loss
- Building code upgrade may require ADA compliance
- Consult with attorney on legal requirements
Historic Properties
Many DC commercial properties are historic:
- Agreed value coverage for unique features
- Specialized restoration contractors
- Approval processes add time to restoration
- Higher replacement costs than modern construction
Loss Control and Risk Management
Recommended Loss Control Measures
| Measure | Benefit | Cost |
|---|---|---|
| Fire Suppression Systems | Premium discounts, reduced risk | $3,000-50,000+ |
| Security Systems | Theft prevention, premium discounts | $1,000-10,000 |
| Water Leak Detection | Early warning, prevents major damage | $500-5,000 |
| Backup Power | Business continuity during outages | $5,000-50,000+ |
| Regular Maintenance | Prevents equipment failures | Ongoing |
Business Continuity Planning
DC businesses should have:
- Emergency Response Plan - Who to call, what to do
- Data Backup - Off-site backup of critical data
- Alternative Location - Plan for temporary relocation
- Vendor Relationships - Pre-arranged disaster recovery vendors
- Insurance Review - Annual policy review for adequate coverage
Test Your Knowledge
What does business income coverage pay for?
A
B
C
D
Test Your Knowledge
A business has $500,000 in property value, 80% coinsurance, and $300,000 in coverage. If a $200,000 loss occurs, how much will the insurer pay?
A
B
C
D