Last reviewed: September 2026
Most business owners know whether they have property insurance. Far fewer know whether the limit on the declarations page would actually rebuild the building, replace the equipment, and keep payroll going while the work happened. Those are different questions, and the second one is where commercial property claims go wrong.
This page walks through what a commercial property policy actually covers, the three places coverage differs most between policies, and the handful of exposures the standard form leaves out entirely.
One framing note before the details. What follows describes the unendorsed standard industry forms. Carriers amend those forms, and excess and surplus lines carriers frequently use their own manuscript wording that differs materially. Form references are given so you can find the matching provisions in your own documents. Your policy controls, not this page.
Start with these questions, not with a product
A property quote is only as good as the information behind it. These are the questions that actually determine what you can buy and what it costs:
- Do you own the building or lease it? A tenant’s exposure is a different policy than an owner’s, and improvements you paid for are treated differently than the building itself.
- What would it cost to rebuild, today, at this address? Not what you paid, and not what it would sell for. Replacement cost is a construction number, and insuring a building to market value is one of the most common and most expensive mistakes on a property account.
- What is your business personal property actually worth? Equipment, inventory, furniture, tools. Most businesses undercount this badly.
- Is anyone else’s property in your care? Customer goods, consigned inventory, equipment you service or store. This is the most commonly missed item on the page, and it is not automatically covered.
- How long could you be closed before it hurt? This sets your business income limit, and it should be tested against a realistic rebuild timeline rather than assumed.
- What does your lease or loan require? Lenders and landlords commonly dictate limits, valuation basis and who has to be named.
- Construction, age, sprinklers, alarm, roof age, electrical. These drive both eligibility and price more than most owners expect.
What does a commercial property policy actually cover?
The standard form separates covered property into distinct categories, each with its own limit on the declarations page. They are not interchangeable — a limit in one category does not respond to a loss in another. One exception: if your policy is written on a blanket limit rather than scheduled separately, those category walls are deliberately removed. Check which one you have, because it changes the answer to almost everything below.
The building
The structure and completed additions, plus fixtures including outdoor fixtures, permanently installed machinery and equipment, and property you own that is used to maintain or service the building — fire-extinguishing equipment, outdoor furniture, floor coverings, and appliances for refrigerating, ventilating, cooking, dishwashing and laundering. If you own the building, this is usually the largest limit on the policy.
Your business personal property
Your own contents used in the business: furniture, equipment, inventory, machinery not permanently installed. This is the limit most often set too low, because owners estimate contents from memory instead of from a schedule.
Tenants — read this part. If you occupy a building you do not own, improvements and betterments made at your expense that cannot legally be removed fall in this category. But the standard form values them on their own rules, and those rules surprise people: tenant improvements are paid at actual cash value only if you repair or replace them promptly. If you do not repair promptly, the form pays a proportion of the original cost instead. And if someone else — your landlord, for instance — pays for the repairs, the form pays you nothing for them. That is true even when replacement cost is elected on the policy. If you have built out a leased space, this provision is worth understanding before a loss, not after.
Is other people’s property in your care covered?
Not automatically, and this one is worth reading twice. The standard form treats personal property of others as a separate category of covered property from your own, requiring its own limit entered on the declarations page. Loss is payable for the account of the owner of that property.
If no limit is entered there, what remains is a coverage extension of $2,500 at each described premises. And that extension is conditional: the coverage extensions apply only if the declarations show a coinsurance percentage of 80% or higher (or a value reporting period symbol). Note that this is a test of what is printed on your declarations page, not a test of whether your limits are genuinely adequate.
If customers leave property with you, if you hold consigned goods, or if you service, repair or store equipment you do not own, this needs to be addressed deliberately. A repair shop with a healthy business personal property limit and no personal-property-of-others limit is a shop that cannot pay for the customer goods sitting in its own building.
Two narrower provisions do reach property you do not outright own, and they sit inside your own business personal property rather than in the property-of-others category: labor, materials or services you furnished or arranged on personal property of others, and leased personal property you have a contractual responsibility to insure. The first insures your interest in the work you put in, not your customer’s property itself.
Business income and extra expense
Property coverage rebuilds the building. Business income coverage is what keeps the business alive while that happens — it replaces the net income you would have earned and continues the operating expenses that do not stop, payroll included if you schedule it that way. Extra expense pays the additional costs of keeping going: a temporary location, expedited shipping, rented equipment.
These are usually bought together, and they are frequently the difference between a business that reopens and one that does not. How long the coverage actually pays is covered below, because it is the most misunderstood provision on the policy.
Which causes of loss are covered?
This is where two policies with identical limits stop being comparable. The standard program uses three different causes-of-loss forms, and which one you have changes what is covered:
| Form | How it works |
|---|---|
| Basic (CP 10 10) | A list of named perils. If the cause of loss is not on the list, it is not covered. |
| Broad (CP 10 20) | The Basic list plus three more named perils — falling objects, weight of snow, ice or sleet, and water damage from accidental discharge or leakage of plumbing, heating, air conditioning or appliances — together with an additional coverage for collapse. |
| Special (CP 10 30) | Written the other way around. Direct physical loss is covered unless excluded or limited in the policy. You are not restricted to a list, but the exclusions and limitations are real and there are many. |
One trap worth knowing: theft is not a named peril in the Basic or Broad forms. Vandalism is — and the vandalism peril states expressly that it does not cover loss resulting from theft, except for building damage caused by burglars breaking in or exiting. So a policy on Basic or Broad can pay for the broken window and not for the inventory taken through it.
And if you are a tenant carrying business personal property only, that building-damage exception does you no good at all — the window belongs to your landlord. A tenant with stealable inventory on a Basic or Broad form has a real problem.
Special form is generally what you want, and it is what most well-written commercial property policies use. It is also one of the reasons a cheaper quote is sometimes cheaper — check the form before you compare the premium.
Finally, “special” and “all risk” are not the same as “everything,” and the phrase to watch is or limited. Carriers routinely attach exclusions and limitations to the Special form — theft, water, hail damage to roof surfacing, cosmetic damage — that narrow it substantially. Two Special form policies are not necessarily the same policy.
How will your loss actually be valued?
Three separate provisions decide what you collect, and they interact. A policy can carry the right limit and still pay less than you expect because of these.
Is replacement cost the default? No.
The standard form values loss at actual cash value — replacement cost less depreciation — unless otherwise provided. Replacement cost is an optional coverage that applies only when it is shown on the declarations page. Check yours rather than assuming.
Even with replacement cost elected, the form generally does not pay on a replacement cost basis until the property is actually repaired or replaced, and not unless that is done as soon as reasonably possible. Payment is limited to the least of the applicable limit of insurance, the cost to replace with property of comparable material and quality used for the same purpose, or the amount you actually spend. In practice that means an initial actual cash value payment and the balance once the work is done and documented — you may claim actual cash value first and make a supplemental replacement cost claim afterward, within the time the form allows. Plan for that cash flow. It catches people mid-claim.
What is coinsurance, and why does it reduce a claim?
Coinsurance is not a deductible and not a co-pay. It is a condition testing whether you insured the property adequately, and it bites hardest on partial losses — which is most losses.
If your policy carries an 80% coinsurance clause, you are agreeing to insure the property for at least 80% of its value. The form works in steps: multiply the value of the property at the time of loss by the coinsurance percentage to get the amount required, divide the limit you carried by that figure, and multiply the result by the loss. The policy pays that figure or the limit of insurance, whichever is less, and the deductible comes off after.
Which “value” matters here is the part most examples get wrong. Coinsurance uses value on your policy’s valuation basis — replacement cost value if replacement cost is elected, actual cash value if it is not. It is not market value and not the appraised value for a loan.
A worked example. A building with a replacement cost value of $1,000,000, replacement cost elected, 80% coinsurance — so $800,000 is required. You carried $600,000. A $200,000 fire loss with a $5,000 deductible:
- $600,000 ÷ $800,000 = 0.75
- 0.75 × $200,000 = $150,000, which is less than the $600,000 limit, so that stands
- less the $5,000 deductible = $145,000 paid on a $200,000 loss
Be clear about what the shortfall is made of. $50,000 of that is the coinsurance penalty — the consequence of under-insuring. The remaining $5,000 is the deductible you owed regardless. The penalty is the part that was avoidable, and it is not a denial or a dispute; it is arithmetic you agreed to when the limit was set.
This is the strongest argument for revaluing buildings at renewal rather than letting a limit ride for years while construction costs move.
Does agreed value fix the coinsurance problem?
Partly, and it is worth asking for. Agreed value is an optional coverage within the standard form — not a separate endorsement — activated by an entry on the declarations page. When it applies, the coinsurance condition does not apply.
What it does not do is remove proration. Recovery is still limited to the proportion that your limit of insurance bears to the agreed value shown on the declarations. The improvement is that the figure you are measured against is fixed in advance rather than recalculated at the time of loss, which is real protection against construction inflation between renewals. Anyone who tells you agreed value “eliminates any penalty” is overselling it — and note the corollary: if the agreed value itself was set too low, agreed value locks in that shortfall rather than protecting you from it. The figure has to be right.
Two practical points. Carriers generally require a current statement of values to write it — that is an underwriting requirement rather than something the coverage form itself imposes. And the option carries an expiration date: if it is not extended at renewal, the option lapses and the coinsurance condition comes back.
What does the standard property form not cover?
These are not obscure exclusions. They are ordinary exposures for ordinary Ohio businesses, and each has a solution that has to be bought deliberately.
Flood
Excluded. Commercial flood coverage through the National Flood Insurance Program is capped at $500,000 for the building and $500,000 for contents, and the NFIP expressly excludes business interruption and loss of use. Those caps are the NFIP’s ceiling, not the market’s — private primary, excess flood and difference-in-conditions markets sit above them, which is where businesses with higher values or real exposure end up. Being outside a mapped high-risk zone changes the price, not the physics.
Equipment breakdown
Also excluded on the Special form, through separate provisions covering mechanical breakdown including rupture or bursting caused by centrifugal force, artificially generated electrical current, and explosion of steam boilers, pipes, engines or turbines you own or control. Ensuing fire is generally still covered. Basic and Broad do not cover breakdown either — it simply is not on the list of named perils.
So if a compressor, chiller, elevator, walk-in cooler or main electrical panel fails from the inside, the property form is generally not the answer. Equipment breakdown coverage — the modern version of boiler and machinery — is added by endorsement or written separately, and it usually picks up the spoilage and the business income that follow the failure. For a restaurant, a grocer, or any business with refrigeration or process equipment, this is not optional in practice.
Ordinance or law — the one that catches older buildings
The standard form excludes the increased cost of complying with building codes after a loss. That matters most in exactly the buildings Fairfield, Hamilton and the older Cincinnati neighborhoods are full of: a structure built legally decades ago that no longer meets current code.
Ordinance or law coverage (CP 04 05) addresses it in three parts:
- Coverage A — loss to the undamaged portion of the building, when code requires you to tear down what the fire did not. Coverage A carries no separate limit of its own and does not increase the building limit — it draws on the building limit already shown on the declarations.
- Coverage B — the cost of demolition and debris removal for that undamaged portion. Requires a scheduled limit.
- Coverage C — the increased cost of rebuilding to current code. Requires a scheduled limit. B and C can also be written on a single combined limit.
The failure mode is specific and expensive: a partial loss on an older building where the code official requires the rest to come down. Without B and C scheduled at meaningful limits, that gap lands on the owner. Worth noting that surplus lines wordings often sublimit ordinance or law sharply, or exclude it outright — so on a non-standard policy this is a provision to read rather than assume.
Property under construction
Worth being precise about, because it is often stated too broadly. The standard property form is not a builders risk form, but it does give limited, secondary coverage — it reaches additions under construction, alterations and repairs to a building already insured on the policy, and materials, equipment, supplies and temporary structures within 100 feet of the premises used for that work, but only if not covered by other insurance.
New ground-up construction is a different animal and needs a builders risk policy. If you are adding to a building you already insure, tell us — the right answer depends on the size of the project relative to the existing limit.
How long does business income actually pay?
Not “until you reopen.” This is the most common misunderstanding on the entire policy.
Business income is paid for the period of restoration. Under the unendorsed form that period begins 72 hours after the time of direct physical loss for business income, and immediately for extra expense. Many carriers will buy that waiting period down to 24 or 12 hours by endorsement, so the 72 hours is a starting point rather than a fixed rule — ask.
The period ends on the earlier of two dates: the date the property should be repaired, rebuilt or replaced with reasonable speed and similar quality, or the date you resume operations at a new permanent location.
Read “should be” carefully. It is a theoretical repair period, not your actual timeline. If the rebuild drags for reasons the form does not recognize, coverage can end before your doors open. And the form expressly does not include any increased period required by the enforcement of or compliance with an ordinance or law — which is a second reason older buildings need the ordinance-or-law conversation. That specific gap is fixable: CP 15 31, Ordinance or Law – Increased Period of Restoration, is the endorsement that closes it.
On the limit: a “12-month” business income limit is an assumption, not a feature of the form. The unendorsed business income form has no 12-month cap — recovery is bounded by your limit of insurance and by the period of restoration. Twelve months comes from the coinsurance basis used to set the limit. A hard time cap only appears if a monthly limit of indemnity or a maximum period of indemnity is shown on your declarations. So the real question is whether your limit funds a realistic rebuild timeline for your building in this construction market.
And on the tail end, a correction to something often said loosely: your policy almost certainly already includes extended business income, commonly 60 consecutive days running after operations resume. It ends on the earlier of that day count or the date you could restore the income level that would have existed without the loss, and it shares the same limit of insurance. The Extended Period of Indemnity optional coverage replaces those 60 days with a longer scheduled number — 90, 180, 365 days and up. So the right question is not “do I have it” but “is 60 days enough for my business,” because revenue rarely returns to normal the day you unlock the door.
How do wind and hail deductibles work?
Many commercial property policies apply a flat dollar deductible to most losses but a percentage deductible to wind and hail. The percentage is generally not applied to your loss — it is applied to a limit or statement-of-values figure for the property that was damaged, which makes it far larger than owners expect.
On a building insured for $2,000,000 with a 2% wind and hail deductible, the deductible on a hail claim lands in the range of $40,000, against the $5,000 that applies to the rest of the policy. It is also commonly calculated separately for each building, for personal property at each building, and for personal property in the open — so a multi-building account can absorb the deductible more than once in a single storm.
The exact base varies. Some wordings run the percentage against the limit of insurance on the damaged property, others against the value at the time of loss, and surplus lines carriers frequently use their own manuscript wording. The base is whatever your endorsement says — read it, and note that under blanket coverage it is usually the per-building statement-of-values figure rather than the blanket limit. If you do not know what your wind and hail deductible is and what it attaches to, that is a phone call worth making before the next storm rather than after it.
Why this matters in Butler and Hamilton County
Greater Cincinnati falls in the National Weather Service Wilmington county warning area — a region that spans southwest and central Ohio, southeast Indiana and northern Kentucky. Counting confirmed tornadoes across that whole area: 24 in 2023, 47 in 2024 and 22 in 2025, so 93 over three years, against 55 in the three years before. Separately, and on a different geography, Ohio statewide recorded 74 tornadoes in 2024, breaking a state record of 62 that had stood since 1992.
Three honest caveats, because these numbers get misused. The Wilmington figures are a multi-state forecast area, not Ohio counts and not Butler or Hamilton County counts — do not read the 47 and the 74 as the same kind of number. Detection and reporting have improved over the period, which inflates recent counts against older ones. And the year-to-year swing is enormous: 2019 alone produced 34 in the Wilmington area. This is arithmetic, not a forecast, and it is not a claim that storms are becoming more frequent.
What it does support is narrower and more useful: wind and hail are the realistic loss driver for commercial buildings in this market. That puts roof age, the causes-of-loss form and the wind and hail deductible at the center of the conversation rather than the edge of it.
How much coverage do you need?
Three different sources make a claim on that answer, and they rarely agree:
- What your lease or loan requires. A hard floor, often specific as to valuation basis and who must be named. Non-compliance can be a default, not just an insurance problem.
- What the coinsurance clause requires. A second floor, and the one that quietly reduces claims when it is not met. Set limits so this is satisfied at today’s rebuilding cost, on your policy’s valuation basis.
- What it would actually take to recover. The building, the contents, the property of others, the code upgrades, and enough months of business income to survive a realistic rebuild.
The third number is usually the largest, and it is the only one nobody requires you to carry.
Why work with Lighthouse
We are an independent agency in Fairfield, which means we are not placing your property with one company because it is the only company we have.
On a property account the work is almost entirely in the details this page has been describing — which causes-of-loss form, what the valuation basis is, whether coinsurance is actually satisfied at current construction cost, whether property of others has a limit, what the wind and hail deductible attaches to, whether ordinance or law is scheduled at a meaningful number, and whether the business income limit matches a real rebuild timeline.
Those details decide what a claim pays, and a side-by-side premium comparison hides every one of them. We would rather have that conversation at the quote than at the loss.
Call (513) 860-2552, or request a quote and tell us what you own.
About this guide
Last reviewed: September 2026. Written by the licensed staff at Lighthouse Agency Insurance, Fairfield, Ohio.
This page describes how commercial property coverage works under the unendorsed standard industry forms in general use. It is general information — not a coverage opinion, and not a substitute for your own policy. Carriers amend standard forms, form editions differ, and excess and surplus lines policies frequently use manuscript wording that departs from the standard form in material ways. Limits, exclusions, deductible bases, valuation provisions and coinsurance percentages all vary from policy to policy.
Form numbers are given so you can locate the corresponding provisions in your own documents. The controlling language is the policy you actually hold — its declarations page and every endorsement attached to it. If you want to know how your coverage responds to a specific situation, send us the policy and ask.
Related
- Commercial insurance overview
- General liability insurance — third-party claims, which property coverage does not address
- Builders risk — for ground-up construction
- Commercial auto insurance
- Commercial umbrella
- Contractors insurance
- Commercial insurance FAQs
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