Damage Not Covered by Commercial Insurance
Commercial insurance protects businesses against many risks, but policies do not cover every type of loss. Understanding exclusions is important for business owners so they can identify coverage gaps and decide if additional policies are needed.
Normal Wear and Tear
Commercial insurance does not pay for gradual deterioration or maintenance issues. For example, if your building’s roof leaks because it is old and worn out, the damage is not covered. Insurers expect businesses to maintain their property and equipment to avoid predictable losses.
Intentional Acts
If damage is caused intentionally by the policyholder or employees, it is not covered. For instance, deliberately damaging company property or staging an accident to collect insurance benefits is excluded. Insurance is meant to protect against accidental or unforeseen risks, not deliberate actions.
Flood and Earthquake Damage
Most standard commercial property policies exclude flood and earthquake damage. Businesses in areas prone to these natural disasters need separate flood insurance through the National Flood Insurance Program (NFIP) or specialized earthquake coverage. Without these policies, repairs and losses must be paid out of pocket.
Acts of War or Terrorism
Damage caused by war, nuclear events, or government action is typically excluded. While some insurers offer terrorism coverage as an add-on, acts of war remain uninsurable because of their catastrophic and unpredictable nature.
Employee Dishonesty or Theft
Commercial insurance usually excludes losses caused by employee theft, fraud, or dishonesty. For example, if an employee embezzles company funds or steals merchandise, a standard commercial policy will not cover the loss. Business owners may need a fidelity bond or crime insurance for this type of protection.
Utility Failures and Power Outages
If a power outage or utility service failure occurs outside your property and causes a loss, most standard policies do not provide coverage. For example, if spoiled food results from a citywide blackout, the loss may not be covered unless you have a specific endorsement for utility interruptions.
Conclusion
Commercial insurance offers broad protection for property damage, liability, and business interruptions, but it has clear exclusions. Wear and tear, intentional acts, floods, earthquakes, war, employee dishonesty, and utility failures are common examples of uncovered risks. Business owners should review their policies carefully and consider supplemental coverage to close potential gaps.
