Commercial property insurance

Commercial property insurance protects against the risks of owning or renting an office, storefront, or other business property. It covers property losses when a fire damages your office, or a pipe bursts and floods your store.

Items that are covered include:

• Inventory
• Furniture and fixtures
• Computers and electronics
• Tools and equipment
• Broken windows and structural damage
• Lost income (when your policy includes business interruption insurance)

If you rent a commercial space, your landlord may require you to carry this coverage. Even when it’s not required, commercial property insurance is important for any small business that owns physical assets.

You may also see this type of insurance referred to as business hazard insurance.

Commercial property insurance covers your business’s real estate and its contents. It helps pay for repair or replacement when business property is lost, damaged, or destroyed.

Your business assets aren’t just expensive—they keep your business running. With commercial property insurance, you’ll be able to afford repairs for necessary equipment after an unexpected event like a fire or a break-in.

A commercial property insurance policy can cover your:

Landlords often require proof of commercial property coverage, liability coverage, or another type of business renter's insurance from their business tenants. Though landlords carry property insurance for their buildings, they won’t take responsibility for any expensive business property a tenant keeps on site.

Additionally, lenders often mandate business property insurance for the life of the mortgage.

Even when it’s not required, commercial property insurance is a crucial part of risk management for any business that owns a building, valuable equipment, or expensive inventory. It helps your business recover financially from incidents such as:

• Fire
• Lightning
• Wind and hail
• Water damage
• Theft
• Vandalism

Remember, homeowner’s insurance doesn't usually cover lost or damaged business property, so home-based businesses should also consider commercial property insurance.

This policy is especially important for certain professions, such as:

Property insurance is crucial for any business that sells, distributes, or manufactures goods. For example, if a pipe bursts in a grocery store, a commercial property policy would cover the cost of replacing all of the food that had to be thrown away.

If you rent a commercial space, you can purchase a policy that covers only owned items in the space. You may also need to insure equipment that you lease, depending on your arrangement with the owner.

Tech companies rely on their computers and other expensive electronics on a daily basis.

If a thief breaks into your office and makes off with thousands of dollars' worth of monitors, PCs, and laptops, a commercial property policy will cover the cost of replacing the stolen items.

Construction companies and contractors rely on several different types of specialized property insurance to cover their risks. They might need contractor's tools and equipment coverage to protect power tools that travel to different job sites, or builder's risk insurance to cover a structure in progress.

If a fire destroys your tools and equipment, or someone vandalizes a construction site, these policies will help you recover financially.

Commercial landlords, property managers, and other real estate professionals likely need a policy that covers the actual building and all contents, including mechanical and electrical systems.

If you rent a space, you may want to ask your tenants to carry insurance to make sure their own items are protected as well. You should also consider purchasing lessor's risk only (LRO) insurance to protect yourself from legal fees if an accident happens on your property, as well as a building insurance policy, which covers property damage to buildings, structures, and completed additions that you lease to commercial tenants.

Commercial property insurance covers a commercial building and its contents. However, it doesn't cover every risk or type of property. Here are a few situations where you may need additional coverage:

Commercial property insurance usually covers damage caused by named perils. That includes burglaries, vandalism, fires, and windstorms. But it doesn't cover normal wear and tear, natural disasters (such as a hurricane), and many other types of risks.

Typically, this policy covers your building and business personal property (BPP) kept at that location. If you don’t own or rent a building or other commercial space, then you can instead add BPP coverage to your general liability policy as an endorsement. This would cover assets stored at a designated location, such as your home or a storage unit.

Commercial property insurance coverage offers policyholders a choice of receiving cash value or replacement value for stolen or destroyed items. An actual cash value policy costs less, but pays out only what the item is currently worth. Due to depreciation, you might have to pay money out of pocket toward the replacement cost.

Opting for replacement value means that the carrier will reimburse the lost equipment with a brand-new equivalent. While replacement value policies have a higher insurance rate, the extra cost may be beneficial for businesses that depend on state-of-the-art equipment, such as many IT companies.

Commercial property insurance has some coverage exclusions. For example, it usually doesn't pay for property damage caused by natural disasters like earthquakes, hurricanes, tornadoes, and floods.

If you need coverage for these events, you can add an endorsement to your policy. Alternatively, you can see if your business is eligible for parametric insurance, which relies on predefined triggers in the form of measurable events, such as wind speeds exceeding 100 mph.

Property insurance also doesn't cover damage caused by short circuits, power surges, or loss of pressure. An equipment breakdown endorsement extends coverage to damage caused by these events.

Additionally, it won't cover business vehicles. If your business owns a company vehicle, you’ll typically need to purchase commercial auto insurance to comply with state law.

You can add endorsements (riders) to your policy to fill other gaps in coverage too. Check with an Insureon agent to make sure your insurance policy includes the type of coverage you need.

If you want to learn more about this policy, you can find additional answers in our frequently asked questions about commercial property insurance.

You can also consult with an insurance agent about your insurance needs and get free small business insurance quotes from top U.S. insurance companies.