Building insurance for property owners

Building insurance covers buildings, structures, and completed additions that you lease to commercial tenants.

For example, building insurance covers costs related to:

• Fires
• Windstorms
• Natural disasters
• Burst pipes
• Vandalism and theft

If a fire damages your property, building insurance can cover the cost of renovations to the walls, floors, ceilings, and any permanently installed fixtures or equipment. The same is true for water damage from a burst pipe, or windows broken by severe weather.

However, building insurance doesn't cover office equipment or other moveable property, which is why you might also want the protection for your business personal property (BPP) afforded by standard property insurance.

As with other types of business property insurance, insurance on a building typically won't provide protection against floods and earthquakes, but you can add these coverages as an endorsement.

Building insurance specifically covers the physical structure of a property, including its walls, roof, floors, and permanently installed fixtures. Commercial property insurance is a broader term that can include coverage for the building, as well as business property, equipment, inventory, and other assets.

Building coverage is strongly recommended for real estate businesses that own rental properties, such as apartment buildings, condominiums, and warehouses. While it generally isn't required by law, a lender may require building coverage as a condition of a mortgage or other loan. Lease agreements and other contracts may also require property insurance coverage.

Commercial landlords may need the extra coverage offered by building insurance since they face more risks than the average small business owner when it comes to accidents and damages at their properties.

A standard general liability insurance or commercial property insurance policy will likely have exclusions for people who rent out property. That’s why so many small business owners who work in real estate have specialized insurance for buildings to reduce their risk exposures and pay for costly repairs.

For example, if you own a building with both commercial and residential spaces, you’d likely need mixed-use property insurance, which is a specialized form of commercial property coverage that handles the unique risks of dual-occupancy buildings.

Commercial landlords can often add building insurance to their lessor’s risk only insurance (LRO) policy. LRO insurance helps protect landlords from liability claims involving tenants, visitors, and customers, while building insurance protects the building itself from covered damage, such as fire, theft, vandalism, and certain weather-related events.

Together, these coverages provide protection similar to a business owner’s policy (BOP), combining general liability and property insurance in a package designed for the unique risks faced by commercial landlords and building owners.

With building insurance, you have a few choices in terms of how much coverage you wish to purchase for your property, such as:

The per-occurrence limit is the total amount of coverage you’ll have for each building you own that's stolen from or damaged in a single incident. It’s basically the total cost of damage for one event your insurance will cover.

The aggregate limit is the maximum amount your insurance company will pay for all covered losses during the policy period (typically one year).

Landlords and commercial building owners with more than one property often add a per-location aggregate endorsement to their general liability policy. This gives each building its own separate aggregate limit rather than sharing one limit across the entire portfolio. 

Your policy’s deductible is the amount you have to pay before your insurer will cover a claim. Choosing a high deductible can lower your premium, however it should be an amount you can easily afford out of pocket, so you can benefit from your insurance when you need it.

The actual cash value is one way of calculating how much an insurance company will pay on a property claim. It's how much the used item is worth. This type of value factors in any depreciation, or wear over time, and can be an inexpensive way to insure your physical assets.

The replacement value is another method insurance companies use to calculate a property claim. It covers the cost of a brand-new replacement for the property that was lost or damaged. Since they pay out more on a claim, replacement cost policies generally have higher premiums than those based on actual cash value.

Building insurance and lessor’s risk only insurance cover most of the risks of renting out properties, but they're not the only policies you should have. Additional coverages for landlords and other real estate professionals to consider include:

A general liability policy covers basic third-party risks, such as someone who trips on a loose rug at your office and suffers an injury. However, it won't cover accidents involving tenants at your rented properties, which is covered by LRO.

For example, if a visitor slips and falls in a common area and sues, general liability can help pay for medical expenses, legal fees, settlements, and court-ordered judgments. Together, building insurance and liability coverage can provide broader protection for commercial landlords and building owners.

Errors and omissions insurance, also called E&O or professional liability insurance, covers legal defense costs related to any professional mistakes or oversights your business makes.

Workers’ comp is required in most states and covers medical costs when an employee is injured on the job. It also protects sole proprietors against work-related medical bills health insurance might deny.

A business owner’s policy, or BOP, bundles general liability with commercial property insurance for less than if you'd purchased the policies separately. It covers business property claims at your office, but not damage to buildings you rent out.

Commercial auto insurance covers the cost of accidents involving your company vehicle. Most states require this coverage for vehicles owned and operated by a business.

Cyber liability insurance helps real estate professionals recover from costly cyberattacks and data breaches. It also provides coverage for breach notification costs, fraud monitoring services, and more.

Often added to property insurance, business interruption insurance covers lost income and other expenses when a covered event forces you to temporarily close.

Your renters will also need to carry their own renter’s insurance to protect their property.

Are you ready to safeguard your real estate or landlord business with building insurance?

Simply complete Insureon’s easy online application today. We partner with top-rated U.S. insurance companies to get you the best business insurance. You can also consult with an insurance agent on the types of business insurance you need, and how to get affordable coverage within your budget.

Once you find a policy that fits your needs, you can begin coverage and access your certificate of insurance (COI) in less than 24 hours.