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Commercial property insurance
Commercial property insurance
Commercial property insurance pays to repair or replace stolen, lost, or damaged business property. It covers your business’s physical location and other assets like equipment.
What is commercial property insurance?
Commercial property insurance helps your business recover from theft, fires, storms, and other incidents that damage or destroy business property. It covers your building and its contents, along with some exterior features.
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)
- Exterior signs and fencing
You may also see this type of insurance referred to as business hazard insurance.
Why is commercial property insurance important for small businesses?
Property insurance is crucial because it ensures your business can withstand the most common insurance claims, such as fires, water damage, and burglaries. After a disaster, most small businesses (65%) either don't reopen or fail within one year.
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.
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.
Businesses that purchase a policy typically:
- Own or rent a building, store, or office
- Own or rent expensive tools or equipment
- Have products or inventory
- Depend on valuable business assets, such as computers
What does commercial property insurance cover?
Commercial property insurance covers your business’s real estate and its contents. It helps pay for repair or replacement in the event of business property damage or loss.
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.
A commercial property insurance policy can cover your:
Business-owned building
Commercial property insurance protects a building owned by your business against fires, vandalism, and other types of damage.
Computers and electronics
If computers, tablets, smartphones, or other company-owned devices are destroyed or damaged, commercial property insurance will cover your financial losses. However, for data loss, you'll need to add electronic data processing insurance to be fully protected.
Furniture and fixtures
The furniture and fixtures inside your owned or rented building are protected by commercial property insurance.
Supplies and equipment
If your business’s office equipment or supplies are damaged, destroyed, or stolen, commercial property insurance coverage can help repair or replace them.
Inventory
Commercial property insurance protects your inventory against theft, fire, and other causes of loss.
Outdoor fixtures
Your policy also covers fences, signs, lighting, and other fixtures and exterior items owned by your business.
How much does property insurance cost?
Commercial property insurance costs an average of $108 per month for Insureon's customers. Annual premiums range from around $300 to over $15,000 per year.
Small business owners can often bundle property insurance with general liability coverage in a business owner's policy (BOP), which costs an average of $83 per month.
Your premium depends on the value of your business property, among other factors.
What factors impact the cost of commercial property insurance?
Underwriters consider several factors when determining your property insurance premium, such as:
- Location. Regional factors such as crime rates, population density, property values, and risk of severe weather or fires will affect your insurance rates.
- Hazards covered. An open perils policy that provides coverage against a wide range of risks will cost more than a policy that only covers named perils.
- Property value. The value of your building and its contents affects your premium, as you'll need sufficient limits to cover a potential loss.
- Age and type of property or equipment. Newer items cost more, which means it'll cost more to insure them. However, newer buildings are less expensive to insure as they're in better shape and more resistant to weather.
- Property size. Insurance companies will look at the square footage of your property to determine your premium, with larger spaces costing more to insure.
- Risk management practices. Security systems, fire alarms, and sprinkler systems reduce the likelihood and severity of property claims, which helps lower your premium.
- Policy limits and deductible. You can save money on property insurance by choosing lower limits or a higher deductible, but make sure you have sufficient coverage for a potential claim. The average deductible for Insureon's customers is $1,000.
- Claims history. A business with a clean history of claims may see lower insurance rates than a company that has filed a claim on their policy.
Because these factors vary widely among small businesses, there's a wide range of pricing as well. Among our customers, 46% pay less than $100 per month for commercial property insurance, and another 22% pay between $100 and $200 per month.
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Who needs commercial property insurance?
Landlords often require proof of commercial property coverage, liability coverage, or 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. If you're a low-risk, financially responsible business without a history of property losses, it should be easy to secure coverage.
This policy is especially important for certain types of businesses, such as:
Retailers, wholesalers, and manufacturers
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.
IT and technology
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 in monitors, PCs, and laptops, a commercial property policy would cover the cost of replacing the stolen items.
Construction
Construction companies and contractors rely on several types of specialized property insurance to cover their risks.
They might need contractor's tools and equipment coverage, a type of inland marine insurance, to protect power tools that travel to different jobsites. Another common policy is builder's risk insurance, which covers 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.
Real estate
Commercial landlords, property managers, and other real estate professionals likely need a policy that covers a building and its contents, including mechanical and electrical systems.
If you rent out a space, you may want to ask your tenants to provide a certificate of 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 damage to buildings, structures, and completed additions that you lease to commercial tenants.
Top professions we insure
What does commercial property insurance not cover?
Commercial property insurance covers a commercial building and its contents. However, it doesn't cover every risk or type of property. For instance, it won't cover normal wear and tear.
Here are a few situations where you may need additional coverage:
Goods in transit and mobile equipment
If your business needs coverage for items in transit or equipment that moves to different worksites, you may need inland marine insurance. Common types include tools and equipment coverage and equipment floater insurance. High-value items may need separate scheduled coverage on the policy.
Inland marine insurance covers equipment, tools, and other possessions that move from place to place. It also provides a way to insure items that are loaned out to different locations.
Damaged customer property
General liability insurance covers property belonging to your customers and clients. It helps cover legal costs if someone sues over a broken item or an accidental injury.
Business interruption
Business interruption insurance, also called business income insurance, covers financial losses when a covered property claim forces a business to close temporarily. It can pay for loss of income, employee wages, and other day-to-day expenses.
This policy sometimes includes extra expense coverage, which covers costs beyond routine operating expenses. For example, you might need to move to a temporary location or hire additional employees after a fire or other disaster.
Employee theft
Employee dishonesty coverage, or a fidelity bond, provides reimbursement if an employee steals from your business or your clients. Some clients may require you to have this coverage.
Malfunctioning equipment
Equipment breakdown coverage pays to replace malfunctioning equipment after a mechanical or electrical failure. You can add this extra coverage as an endorsement on your commercial property insurance policy.
Destroyed payment records
If a burst pipe or other incident destroys customer records, your business could have trouble collecting outstanding customer payments. This isn't considered a covered loss of commercial property insurance, unless your policy has an accounts receivable endorsement.
General liability insurance
General liability insurance covers common business risks like customer injury, customer property damage, and advertising injury. It protects your small business from the high costs of lawsuits and helps you qualify for leases and contracts.
Business owner’s policy
A business owner’s policy (BOP) bundles general liability insurance with commercial property insurance. It typically costs less than if the policies were bought separately.
Workers’ compensation insurance
Workers’ compensation insurance covers medical costs and lost wages for work-related injuries and illnesses. This policy is required in almost every state for businesses that have employees.
Commercial auto insurance
Commercial auto insurance covers legal bills, medical expenses, and property damage if a business vehicle is involved in an accident.
Cyber insurance
Cyber liability insurance, also called cybersecurity insurance, protects small businesses from the high costs of a data breach or malicious software attack. It covers expenses such as customer notification, credit monitoring, legal fees, and fines.
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FAQs about property insurance
Find answers to frequently asked questions about commercial property insurance and policy bundles.
Is commercial property insurance required by law?
Commercial property insurance isn't usually required by law. However, you may need it in the following scenarios:
- You have a commercial lease. Landlords often require commercial tenants to carry property insurance to protect against potential losses.
- You have a mortgage or a loan. Banks and other lenders may require property insurance for mortgages and other business loans.
- Your business depends on a physical location. Property insurance is critical for companies that have a brick-and-mortar presence, as loss of the location could easily end your business.
What is the difference between actual cash value and replacement cost coverage in property insurance?
Commercial property insurance coverage offers policyholders a choice of receiving actual 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 for a replacement.
- Opting for replacement value means that the carrier will cover the full cost of a brand-new replacement.
Replacement value policies have a higher premium, but may benefit businesses that rely on state-of-the-art equipment, such as IT companies.
What are the most common covered events under commercial property insurance?
Commercial property insurance usually covers damage caused by named perils, such as fires, windstorms, burglaries, and vandalism. Theft is one of the most widespread claims, while fires are among the most costly.
The most common property insurance claims include:
- Theft
- Wind and hail
- Burst pipes
- Fire
- Vandalism
Another frequent claim that's related to property insurance is a business interruption claim. In this case, a fire or other event forces your business to close, and your insurance policy helps cover lost profits, employee wages, and other operating expenses until you can reopen.
Does commercial property insurance cover floods, earthquakes, or hurricanes?
Commercial property insurance won't cover extreme events, such as:
- Earthquakes
- Tornadoes
- Hurricanes
- Floods
If you need coverage for hurricanes or other natural disasters, 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 miles per hour.
Another common exclusion is the loss of perishable items due to a power outage or equipment failure. For this, you would need spoilage insurance, which can be added to your property coverage as an endorsement.
Additionally, property insurance 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 laws.
You can add endorsements (riders) to your policy to fill other gaps in coverage too.
Is it possible to combine my property coverage with other policies?
Yes. Many companies that own or rent their workspace bundle their property coverage with general liability insurance in a business owner's policy, or BOP.
A business owner's policy comes in handy if your landlord requires you to have renter's insurance, or you need general liability coverage in order to secure a contract with a client. It typically costs less than if the policies were bought separately. Most low-risk small businesses are eligible for a BOP.
Similar to a BOP, a commercial package policy (CPP) also bundles property and liability coverage. A CPP offers more flexible protection options. It's generally purchased by high-risk small and medium-sized businesses.
There are several types of liability insurance products that help pay for different kinds of lawsuits. They include:
- General liability insurance for common lawsuits related to customer accidents, copyright infringement, or defamation
- Professional liability insurance, also called errors and omissions insurance (E&O), for disputes over the quality of your work
- Cyber insurance for protection against data breaches and cyberattacks
- Employment practices liability insurance (EPLI) for violations of employee rights
An insurance agent can help you find the right coverage options for your business.
Does commercial property insurance cover home-based businesses?
Commercial property insurance is designed for businesses that own or rent an office, storefront, or other physical location. However, home-based businesses also need commercial insurance, as homeowner’s insurance won't cover items that belong to your business.
If you work from home, you can add a business personal property endorsement to your general liability policy to cover work-related losses. For instance, if you sell baked goods out of your home, a BPP endorsement would help pay for losses from a kitchen fire.
Where can I learn more about commercial property insurance?
If you want to learn more about this policy, you can find additional information 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.
Updated: March 31, 2026