Commercial Property Insurance

Commercial property insurance is a must-have if your business uses specialized equipment, operates from a location outside your home or maintains inventory. Read on to learn more about how coverage works, what is covered and not covered under a standard policy, who needs coverage and how to compare plans. If you're ready to compare quotes, see our side-by-side comparison table just a few scrolls down to find the best business insurance.

What is Commercial Property Insurance?

Commercial property insurance is coverage that protects the physical property, equipment and other assets associated with your business. Your policy will include a list of covered perils, which you will agree to pay a premium to the insurance company in exchange for financial protection against.

Best Commercial Property Insurance Providers

Not sure where to start your search for the best possible commercial business insurance policy? Consider beginning with a few of our favorite providers below. 

How Does Commercial Property Insurance Work?

Commercial property insurance is usually bundled with other types of business insurance policies, such as commercial general liability. Commercial property insurance companies consider the location, construction, occupancy and fire and theft protection of a property when establishing the policy and determining what you’ll pay in monthly premiums to maintain your coverage. 

Like most types of insurance, your commercial property insurance will include a deductible. A policy’s deductible is the minimum amount of money that you’ll need to pay towards repair of damage before your insurance “kicks in” and starts paying for damage resulting from a covered peril on your policy. You may be able to secure a lower monthly premium by choosing a higher deductible. However, it’s important to choose a deductible that you won’t struggle to pay in the event that you do need to use your policy.

Location of the building or office that you’re insuring affects your policy. Buildings in areas that have better fire protection may be cheaper to insure than buildings in areas that have limited fire protection, such as rural areas. Location also accounts for whether the area is prone to storms or other natural disasters that can cause damage, which will have a major effect on the cost of your coverage. 

Construction of the property is also important to the policy. If the building is made of more combustible materials, such as wood, as opposed to fire-resistant materials, such as steel, the policy will likely be more expensive. Structural elements that are within the building are also considered here. Wood structures can affect the policy negatively whereas fire-resistant floors or other special safety structures can help you save money on your coverage.

Occupancy refers to the type of business that occupies the commercial space, which will affect the type of coverage that you’ll need to invest in for your space. This is because different types of businesses come with different types of risks. An office building will have different coverage in its policy than a restaurant would. Some types of businesses can be considered by insurance companies as more hazardous, which can increase what you pay for your coverage. 

What Do These Policies Cover?

A space or tool is considered to be commercial property if it is used in an office or workshop, leased or owned by a business, a manufactured product, any type of inventory, leased equipment or anything else essentially required for your business to function.

Most people consider investing in commercial property insurance for an office or storefront, but it’s a good idea to have coverage for items as well, such as manufactured products. 

Coverage from commercial property insurance varies policy to policy. As a general rule, you can expect your commercial property insurance policy to cover at least the following structures and items. 

• The entire premises of the commercial space, including the building itself and the landscaping 
• Tools and equipment used by the business and inside the commercial space, such as computers and phones 
• Inventory (mostly for businesses that are manufacturing products) 
• Furniture and office supplies
• Accounting records or any other types of important documents 
• Personal property that is being used for business purposes, such as a laptop

Policies should be tailored to your business, but the following are a few general examples of what would be covered with this type of policy:  

• Replacement or repair of the building or structure damaged in a fire
• Any water damage caused by a pipe breaking or another plumbing issue
• Replacement costs for any equipment or merchandise that was stolen
• Repair or replacement of installed fixtures, machinery or equipment 
• Repair of the building that was subject to vandalism
• Repair of any damage caused by a natural disaster that you have an endorsement for 

Commercial Property Insurance Covered Perils

Like your homeowner’s insurance policy, your commercial insurance policy will also include a list of covered “perils,” which are instances when damage to your property is covered. For example, fire is usually considered a covered peril on most commercial insurance policies. This means that your insurance will help you pay for damage resulting from a fire.

On the other hand, intentional damage is usually considered an uncovered peril, which means that your insurance won’t pay out any money towards repairing damage that you caused yourself. Covered and uncovered perils may vary depending on the insurance provider you work with, so be sure to review your individual policy for more information. 

What Doesn't Commercial Property Cover?

The most important thing to note is that commercial property insurance doesn’t cover any part of a building or structure that was not listed on the declarations page of the policy. You must declare all parts of the building and structure or anything being constructed in order for it to be covered. Keep your policy updated, and review your declarations section regularly to be sure that everything you want covered is covered. If you recently renovated or added another part of a building, add it to the policy immediately.

In addition, commercial property insurance does not cover anything involving vehicles owned and used by your business. You’ll need to invest in a separate commercial auto insurance policy to maintain coverage for business vehicles.

Commercial property insurance does not cover liability for employees who are injured on the job either, as these incidents are covered by worker’s compensation insurance. If you have 1 or more employees, you might be required to maintain at least a certain level of worker’s compensation insurance. 

This type of policy doesn’t cover the cost of relocating your business due to damage. In addition, it won’t cover any lost revenue or expenses that may come as a result of the business shutting down to repair damage.

These policies also don't offer protection from possible cyberattacks and data breaches. If you hold sensitive information on behalf of patients, customers or clients, you can purchase a cyber liability insurance policy to protect yourself against these types of attacks. 

Commercial property insurance doesn’t cover any damage caused by a natural disaster unless you have any endorsement for that occurrence. For example, if your business is located in an area that is at higher risk for damage due to hurricanes, then that peril must be specifically included in the policy. If your business is located in a flood zone, you’ll also need to purchase an additional flood insurance policy extension. 

Does Your Business Need Commercial Property Insurance?

No matter if you’re a sole proprietor or the owner of a company with 100 employees, you should consider coverage of this type. You have no idea when damage will occur on your property — and if you don’t have insurance coverage, you could be left with thousands of dollars in repair bills. If you rent your commercial space, your landlord might require that you maintain at least a certain level of commercial rental insurance as a term of your lease. At times, you may need to purchase that coverage before signing the lease. In extreme cases, landlords will charge you for coverage even if you don’t obtain a policy (because they have a partner from which they can purchase coverage.)

Commercial property insurance can be essential to businesses that have equipment that is expensive, or must have a designated space in order to get work done. This kind of insurance offers coverage for any type of commercial property that you might use to complete your business operations. 

Get a Quote for Coverage

Aside from your property, you need to make sure every aspect of your business is protected from financial risk. You should also consider a general liability insurance policy, which you can often combine together with your commercial property insurance under a business owner’s policy (BOP). We recommend connecting with an insurance agent in your area to learn more about the types of coverage you’re required to carry in your state and industry.

If you need more business resources, visit the U.S. Small Business Administration to learn more.

Frequently Asked Questions