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Commercial Property Insurance In Florida (2024)

Austin Landes, CIC
12 minute read

Florida is the land of sparkling beaches, shady orange groves, and pristine, relaxing lakes. But it’s also the land of hurricanes and floods. That means commercial property insurance in Florida is essential for business owners like you – and it also means that affordable coverage can be hard to find. It isn’t impossible, though. With the right knowledge and an experienced broker, you can get the insurance your business needs.

Types Of Commercial Property Insurance In Florida

Commercial property insurance often excludes damage caused by certain weather events or accidents, like water damage due to burst pipes, but these might be covered in a more comprehensive policy. There are three levels of coverage you can have in Florida:

  • Special causes of loss form is the most comprehensive form of coverage. It covers all direct physical damage to covered property unless specifically excluded. We always recommend this type of insurance for businesses in Florida due to the broad range of risks.
  • Basic form covers specific named perils such as fire, lightning, explosion, windstorm or hail, smoke, vandalism, and more. It's less comprehensive than the special form but can be suitable for businesses with lower risk profiles.
  • Broad form includes all the perils covered by the basic form, plus additional perils such as falling objects, weight of snow, ice or sleet, water damage from the accidental discharge of water systems, and more. It’s still less comprehensive than the special form, but more preferable than the basic form.

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What does commercial property insurance in Florida cover?

While the form type you choose determines what perils your policy will cover, it’s also important to know what types of damage to your property are covered. Here’s what’s typically covered under commercial property insurance in Florida.

Business Structure

One section of your commercial property policy will insure the physical structure of your business, including the walls, roof, floors, and any additions, fixtures, and permanently installed machinery. You’ll want to make sure that the coverage amount reflects the full replacement cost of the building to avoid underinsurance penalties. There are two ways to determine the coverage amount:

  • Replacement cost: This method ensures that the policy will cover the full cost to rebuild or replace the damaged property with new materials of like kind and quality, without deduction for depreciation. It's the most comprehensive valuation method and is recommended to ensure full recovery after a loss.
  • Actual cash value: This method calculates the replacement cost minus depreciation. It often results in lower claim payments and higher out-of-pocket costs for the policyholder. While it can lower premiums, it can also leave the business underinsured and financially strained in the event of a significant loss.

Business Personal Property

Standard commercial property insurance in Florida will also cover the contents within the building, such as furniture, equipment, inventory, and other items that are not a “fixed” part of your building structure. It also includes damage to the property of others within your building, such as rented or borrowed equipment.

What isn’t covered under Florida commercial property insurance?

Nearly all commercial property policies have exclusions. Standard exclusions in commercial policies in Florida often include:

  • Flooding is not covered by standard policies. You must purchase separate flood insurance, which we’ll talk about in the next section.
  • Earthquakes are typically excluded and require a separate policy or endorsement.
  • Terrorism is often excluded unless specifically added through a terrorism insurance endorsement.
  • Intentional damage caused by intentional acts of the insured or their employees will be excluded to help protect the insurance company from fraudulent claims.
  • Normal wear and tear, including rust, corrosion, and deterioration, are not covered by standard policies.

Purchasing Flood Insurance For Your Commercial Property

Flood insurance is a critical component of commercial property insurance in Florida. Standard commercial property insurance policies typically exclude flood damage, so businesses must obtain separate flood insurance policies through one of the following methods.

National Flood Insurance Program

The National Flood Insurance Program (NFIP) is a federal program that provides flood insurance to property owners, renters, and businesses in participating communities. It offers coverage for building property and contents but has coverage limits.

For commercial properties, the NFIP provides up to $500,000 in building coverage and $500,000 for business personal property. Policies have a 30-day waiting period before coverage takes effect, so you’ll need to plan ahead and purchase flood insurance well before the hurricane season.

Private Flood Insurance

Private flood insurance is an alternative to the NFIP and can offer higher coverage limits, broader terms, and sometimes a shorter waiting period. Private insurers may provide more flexible and comprehensive coverage options, including additional living expenses, business interruption, and higher limits for building and contents coverage. Private insurance also may have options for customizing deductibles and coverage levels to better suit your specific needs.

Recommended Additional Coverages for Florida Properties

It’s likely that standard commercial property insurance in Florida won’t cover everything you need. You’ll also want to add the following coverages.

Business Interruption

Business interruption insurance provides compensation for lost income and operating expenses if your business can’t operate due to damage from a covered peril. It helps you cover expenses like payroll, taxes, and loan payments while you’re waiting for the damage to be repaired.

Equipment Breakdown

Equipment breakdown insurance covers the cost to repair or replace equipment damaged by mechanical breakdown, electrical surges, and other internal forces. This is crucial for maintaining business operations, especially in a high-risk state like Florida.

Ordinance And Law

Ordinance and law insurance provides coverage for the increased costs associated with rebuilding according to current building codes and ordinances. This includes demolition costs, increased cost of construction, and the cost to upgrade undamaged parts of the building to code.

Wind Buyback

Wind deductible buyback insurance is a specialized option designed to reduce the out-of-pocket expenses associated with high windstorm deductibles. In Florida, where hurricanes and severe windstorms are common, standard property insurance policies often include separate, higher deductibles for wind and hail damage. These deductibles can range from 2% to 15% of the insured value of the property, leading to significant costs in the event of a wind-related claim.

A wind deductible buyback policy allows you to lower your windstorm deductible to a more manageable amount. It’s a must-have for small to medium-sized businesses that may struggle to cover high out-of-pocket expenses, helping to ensure you can quickly repair your property without breaking the bank.

In Florida, where the frequency and severity of windstorms can pose a significant risk to property and operations, we recommend every business have this coverage, regardless of size. An experienced insurance broker can help you determine the appropriate buydown level to match your risk tolerance and financial situation.

Challenges In Florida’s Commercial Property Insurance Market

It’s no secret – especially for business owners – that finding affordable, comprehensive commercial property insurance in Florida isn’t always easy. Insurance in Florida is currently a “hard” market, which means premiums are higher and providers are less willing to take risks. But why?

Significant Weather Events

Florida has faced multiple significant hurricanes over the past decade. For example, in 2022 Hurricane Ian led to more than $112 billion in damage. The resulting high insurance claims and payouts mean that insurers have to increase premiums and become more selective in underwriting policies.

Rising Construction Costs

The market has been further strained by the rising cost of construction materials and labor, particularly after natural disasters. Reconstruction costs in Florida surged by over 12% from January 2022 to January 2023 due to inflation, supply chain issues, and labor shortages. This was the highest of any state.

Dependence On Reinsurance

The market remains heavily dependent on reinsurance, which is when insurance companies pass on some of their liability to other insurance companies to help protect themselves from risk. Reinsurance adds another layer of cost and complexity and this market has also faced pressures, leading to higher costs that are often passed on to policyholders.

Efforts To Stabilize Florida’s Insurance Market

Florida is taking steps to help rein in the crisis for providers who insure businesses in coastal areas. While there is still more to be done to stabilize the market, the state is on the right path.

Legislative Reforms

To stabilize the market, Florida has introduced new laws to reduce litigation and curb fraudulent claims. The reforms include restrictions on certain insurance clauses and tighter deadlines for claim submissions and insurer responses. These measures are designed to help insurers manage costs more effectively and improve market conditions.

Citizens Property Insurance Corporation

Citizens Property Insurance Corporation is Florida’s state-run insurer of last resort, created to provide coverage for property owners who can’t obtain insurance from private companies. As the private insurance market tightens, Citizens has become the largest property insurer in the state, with a growing number of businesses and homeowners turning to it for coverage.

Citizens provides basic property insurance, but often with higher premiums and deductibles compared to private insurers. The coverage includes protection against hurricanes, which is crucial for Florida residents. However, due to its nature as an insurer of last resort, Citizens may face financial strain in the event of a major disaster.

Finding The Right Commercial Property Insurance In Florida

Choosing the right commercial property insurance in Florida starts with understanding the unique risks and difficult market in the state. Getting comprehensive coverage that protects against hurricanes, flood, and other perils, but doesn’t drain your bank account, can be a challenge.

Working with an experienced broker can help you get the right coverage at the right price. LandesBlosch has worked with the best Florida insurance providers for decades, helping business owners tailor policies to their needs. Contact us today to get quotes from the top companies that offer commercial property insurance in Florida.

Austin Landes, CIC

About The Author: Austin Landes, CIC

Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.

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