What is not covered by commercial property insurance?

Complete Guide to Commercial Property Insurance Exclusions

Why This Question Matters for Colorado and Utah Residents

Understanding what isn't covered by commercial property insurance is as important as knowing what is, especially in Colorado and Utah where unique regional risks—like severe hail, wildfire, and flood—can impact businesses in specific ways.

• Major Regional Risks: Colorado ranks #2 nationally for hail claims, and post-wildfire flooding is a rising threat. Standard policies exclude flood and earthquake—key risks in both states.
• Legal Mandates: Policies must clearly state their exclusions, and CO law requires a 60-day claim response window, but excluded risks won't be covered regardless of quick claims handling.
• Coverage Gaps Are Common: 42% of businesses lack flood coverage, and 67% have insufficient business interruption insurance. It's crucial to know what supplemental policies you need.

What Most People Get Wrong

Many business owners assume 'all risks' means 'everything is covered.' In reality, floods, earthquakes, normal wear and tear, ordinance and law upgrades, and most cyber losses are standard exclusions.

Another common mistake in Colorado and Utah is underestimating how much major weather events (hail, fire-followed-by-flood) can cause uninsured losses if the right add-ons aren't in place.

The Complete Picture

A standard commercial property policy typically does not cover:

• Flood: You must purchase a separate flood policy, especially after wildfires when post-burn flooding risk doubles.
• Earthquake: Earth movement requires an earthquake endorsement or separate policy.
• Employee theft or dishonesty: This is not usually included—consider crime coverage for protection.
• Wear and tear: Normal aging, maintenance issues, rust, and deterioration won’t be covered. Proper upkeep is key.
• Intentional damage: Acts done by the insured or employees (unless covered by a specific endorsement) are excluded.
• Utility failures & ordinance/law upgrades: Building code-required upgrades after a loss generally require specific add-on coverage.
• Business interruption gaps: Lost income and ongoing expenses are only covered if “business interruption insurance” is added.

Local stat: In Northern Colorado, average annual commercial property premiums range from $800–$3,000 per $1M in coverage—but that base policy may not protect against regional hazards without endorsements. Only 78% of businesses turn to independent agents for full option reviews. Strong regional storms, wildfires, and fast-changing population patterns make it critical to ask about exclusions and add-ons for your area.

Making the Right Decision for Colorado and Utah Residents

Question 1: Which uncovered risks are most likely for my location?

Analyze your property's region and recent local losses. For instance, are you near a flood plain, wildfire zone, or on the Front Range hail corridor?

• Check FEMA and local maps for flood hazard areas.
• Ask about hail and wildfire frequency (Northern Colorado and Salt Lake regions are hotspots).

Question 2: Do I need specific add-ons or separate policies?

Consider whether business interruption, ordinance/law, cyber, or boiler/equipment breakdown coverage are missing. For flood and earthquake protection, request standalone options—the standard policy will not respond to those events.

• If your business relies on uninterrupted operations, business interruption is often critical.
• Ordinance/law coverage helps with modern code upgrades after damage—a growing need in cities updating building codes for energy or accessibility.

Question 3: How do my coverage choices now affect long-term financial health?

If you're hit by a flood, earthquake, or code-mandated expense, the cost can be 5–10x your annual premium—or even threaten your business's survival. In Colorado alone, uninsured hail losses cost local businesses over $21 billion from 2010–2022. A clear understanding and action on exclusions can prevent catastrophic gaps.