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What Is Commercial Property Insurance and What Does it Cover?

What Is Commercial Property Insurance and What Does it Cover?

| February 18, 2022

Whether the place of business operation is the own facility, rented space or it is operated from home, any firm requires commercial property insurance.

Commercial property insurance happens to be one of the fundamental coverages of a business owner's policy, which protects the structure and the contents. The company's physical assets are protected from fire, explosions, broken pipes, storms, theft, and vandalism with commercial property insurance. Earthquakes and floods are not usually covered by commercial property insurance unless specifically requested.

What Is Commercial Property Insurance and What Does it Cover?

Any business property is covered by commercial property insurance. Fire, theft, and natural disasters are just a few of the hazards that commercial property insurance covers.

Commercial property insurance is carried by a wide range of firms, including manufacturers, merchants, service-oriented businesses, and non-profit organizations. It is usually packaged with other types of insurance.

For enterprises that employ equipment worth billions of dollars, such as railways and factories, commercial property insurance may be a significant investment. Commercial property insurance premiums are frequently deductible as costs by firms. Losses resulting from tenants utilizing the premises are often not covered by commercial property insurance.

The value of a company's assets is the most important consideration in deciding how much it should pay for commercial property insurance. A corporation should take an inventory of their physical assets placed on their premises before meeting with an agent to discuss coverage. This information will aid in determining the replacement value of the business and the appropriate level of coverage.

Do small businesses need commercial property insurance?

Commercial property insurance, often known as business hazard insurance, is required if the business owns or rents an office or workplace. Landlords frequently demand confirmation of commercial property insurance from their renters. Commercial property insurance is usually required by lenders for the duration of the loan.

Despite the fact that landlords insure their premises, owners will not be held liable for any pricey business equipment a tenant retains in the area. Commercial property insurance is vital for every small firm that owns the property, even if it isn't mandated. This policy protects both pricey equipment and inventory.

How does commercial property insurance protect businesses?

The business-owned real estate and goods are covered by commercial property insurance. When company property is lost or destroyed, it might assist pay for repair or replacement.

The company-owned assets aren't simply costly, but also necessary to keep it functioning. It should be able to pay critical equipment repairs following an unforeseen occurrence like a fire or a break-in if the company has commercial property insurance.

What does commercial property insurance cover?

Commercial property insurance extends beyond the structure. The contents of the building, as well as any mobile property, should be covered by the insurance. Contents protection at a warehouse might include important tools, equipment, and storage systems. It might be used to secure goods inventories in a retail setting. It might include furniture, computers, or even the re-creation of documents and records in an office.

Property insurance may cover assets such as the company sign, landscaping, and fences. All of these assets might have an influence on the capacity to conduct routine business.

When vital company assets are utilized off-premises, the insurance policy may expand coverage. 

The protection against loss of income or revenue in the event of property loss is the most significant feature of a property policy. When a direct, physical loss of business income occurs, these provisions provide net income and ongoing costs during the restoration phase. If the firm is forced to close for two weeks due to a fire, the insurance may cover the lost earnings during those weeks.

What does commercial property insurance does not cover?

Standard commercial property insurance coverage may not cover losses caused by natural disasters, floods, or other catastrophic weather occurrences. The same is true for consumer property that is kept at the establishment. Professional liability plans do not cover deliberate or fraudulent activities. Auto accidents are not covered by standard general liability policies. This can be insured by utilizing proper commercial auto coverage.

Albeit typical company insurance plans do not cover everything, coverage riders can be added to ordinary policies to assist cover extra risks.

How Much Does Commercial Property Insurance Cost?

The cost of commercial property insurance is mostly determined by the value of the company's assets and property. A firm with its own office building would pay significantly less in commercial property insurance than a home office, but both contain business property that may be protected by a commercial property insurance policy.

Other criteria that insurance companies take into account when pricing commercial property insurance plans could include the place of business. Business property can be harmed by severe weather. The building's construction depends on the structure built using fire-resistant materials and if the plumbing and electrical system are in good working order. The line of work, because obviously, an accountant's office is likely to be safer than a crowded delicatessen. Protection from fire and robbery is based on the distance between the business location and the nearest fire station or the closest police station. It costs around $100-700 per year, on average.

How Do I Buy Commercial Property Insurance?

Replacement cost and actual cash value are the two most common types of business property insurance.

The expense of rebuilding or replacing the company property with materials of equivalent worth is covered under replacement cost coverage. Depreciation is not deductible.

Actual cash value coverage pays the current market worth of the damaged property. Because depreciation is factored in, a claim check won't be enough to replace what was lost with new products and the business must have made up the difference. Actual cash value coverage will lower the monthly insurance price.


The need for any business to stay protected is very important. Hence, opting for commercial property insurance is a sure-shot way of staying secure and ensuring the safety of the company.