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
- South Carolina coastal businesses need wind, hail, and flood coverage considerations
- The Business Owners Policy (BOP) bundles property and liability for eligible small to medium businesses
South Carolina Commercial Property Insurance
South Carolina 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, tenant improvements |
| 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 | $800,000 |
| Coinsurance % | 80% |
| Insurance Required | $640,000 |
| Insurance Carried | $480,000 |
| Loss Amount | $160,000 |
Calculation:
- ($480,000 / $640,000) × $160,000 = $120,000 payment
- Policyholder bears $40,000 as coinsurance penalty
South Carolina-Specific Commercial Considerations
Coastal Business Exposures
South Carolina coastal businesses face unique risks:
| Exposure | Consideration |
|---|---|
| Hurricane/Named Storm | Separate deductibles may apply |
| Wind and Hail | May need SCWHUA coverage |
| Flood | NFIP or private flood essential |
| Storm Surge | Often excluded; flood policy needed |
Tourism and Hospitality Industry
South Carolina's tourism industry needs:
- Business income for seasonal fluctuations
- Extra expense for quick reopening
- Contingent business income for supply chain
- Event cancellation coverage
Manufacturing and Distribution
Industrial facilities should consider:
- Equipment breakdown coverage
- Inland marine for goods in transit
- Warehouse legal liability
- Spoilage coverage for perishables
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 in South Carolina
- Retail stores (under specific square footage)
- Offices and professional services
- Restaurants (limited cooking operations)
- Wholesale distributors
- Apartment buildings (limited units)
BOP Limitations
- Size and revenue restrictions
- Some businesses ineligible (manufacturing, contractors)
- Coverage limits may be lower than commercial package
- Less flexibility in coverage options
Exam Tip: Coinsurance penalties apply when businesses carry less insurance than the required percentage of property value. In South Carolina, coastal businesses must also consider separate wind/hail coverage through SCWHUA if unable to obtain in the standard market.
A South Carolina 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?