Commercial Property Insurance Basics — Cost, Coverage, and Benefits

Consumer Living
May 31 · 5 min read

A tornado tears the roof off your building! Is your business insured for this? Whether your company is based out of your home, you lease or own a building, every company should have commercial property insurance.

As one of the key components of a business owners policy (BOP), commercial property insurance covers the building and the contents within. This coverage also protects exterior structures and fixtures such as signs, fences, and gates. takes a closer look at what commercial property insurance is, its coverage, cost, and benefits.

What Is Commercial Property Insurance?

A commercial property insurance policy protects your company’s property and physical assets from theft, fire, vandalism, burst pipes, explosions, tree damage, and natural disasters.

However, floods and earthquakes are not covered by commercial property insurance. This insurance can be purchased as rider policies or separate policies altogether.

What Does Commercial Property Insurance Cover?

Also known as “lessors risk,” more comprehensive commercial property insurance policies cover the following:

The Building — Repairs or replaces damages for the building and affixed items which include HVAC units, furnaces, electrical wiring, roof damage, and plumbing.

The Buildings Contents — Covers the cost of damages or loss to items not affixed to the property but kept on the premises which may include supplies, company inventory, equipment, and furniture.

Fences, Signs, Marquees, and Billboards — Whether affixed to the building or free standing on the property, these are covered and can be replaced or repaired when damaged or lost after wind damage, vandalism, fire, or theft.

Property of Others — Protects the property of others under the care, custody, or control of the policyholder.

Lessors risk is a commercial property insurance policy with liability coverage held by a property owner who occupies less than 75% of the structure, and leases out the remaining space. The primary difference between lessors risk and commercial property insurance is the inclusion of liability insurance in lessors risk.

What Does Commercial Property Insurance Not Cover?

Commercial property coverage does not typically cover general liability or worker’s compensation. These and other liabilities are often combined in a business owners policy (BOP), which often helps small business owners save money on their insurance premiums.

Floods, earthquakes, and hurricanes are covered under separate commercial property coverage which protects the property from “acts of God.”

If your business is located in an area where these perils are significant concerns, you should consider additional commercial real estate insurance, as well as business property coverage.

In cases where you feel your insurance should cover a situation or that your claim is being underpaid, contact an insurance public adjuster to review your policy and work to maximize your payout.

How Much Does Commercial Property Insurance Cost?

Determining the cost of a commercial property insurance policy largely depends on the overall value of your business assets, which include the building. Factors used in the calculation of your premiums include:

Fire Protection — Is your building equipped with fire alarms and/or sprinkler systems? How far is the nearest fire hydrant and fire station?

Theft Protection — Is your building equipped with a security system or protected by a private security company?

Building Occupancy — The industry operated on the premises will significantly impact your premiums. An insurance agency would carry less risk than an auto repair shop.

Location — Is your building located in an area prone to severe weather or natural disasters?

Building Construction — Does your building have new or upgraded plumbing, electrical wiring, or HVAC? Were fireproof materials used in the building’s construction?

Between $500 and $1,000 annually is the amount most small businesses can expect to pay for their commercial property insurance. However, these values will vary significantly by state, business use, building size, and construction materials.

Benefits of Commercial Property Insurance

As with any other insurance policy, the true benefits of having one become abundantly clear when you have to use it.

Two common events that your commercial property insurance will help you through are:

A Tree Falls on Your Building — Depending on the size and where it falls, a tree can cause catastrophic damages to your building.

Your insurance policy is in place to help remove the tree, inspect the building for damages, and repair those damages. Knowing the proper next steps are important, so learn what to do after a tree falls on your property.

Severe Weather Damages Your Roof — After a weather system carrying heavy winds with it damages your roof, leaks can cause structural damage and interrupt your business activities.

Your insurance policy will help you to have the roof inspected, and repaired or in worst case scenario, replaced.

Commercial Property Insurance and Your Business

When disaster strikes your business, do you have the insurance policies in place to repair or rebuild? The survival of your business may depend on it.

In this article, you discovered what commercial property insurance is, what it covers, and the benefits of having it.

Without commercial property insurance, repairs from the slightest of emergencies may be enough to cripple your business. Insurance policies tend to be neglected or forgotten until they are needed, at which point the show you their real value by saving your business from failing in many instances.


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