Commercial Property Insurance
Coverage for the things your business owns and the income they produce. Where general liability handles harm you cause to others, this handles damage to what is yours.
This page is general information, not insurance advice, and it does not change any policy. Coverage varies by carrier, policy form, and state. See our disclaimer.
What commercial property is generally intended to cover
The building
If you own the premises, generally intended to respond to covered damage to the structure and what is permanently attached to it.
Business personal property
What you own that stays at the location: furniture, office equipment, computers, stock, and tools kept on site. Mobile and off-site equipment is insured separately.
Tenant improvements
If you lease, the fit-out you paid for is usually yours to insure even though the building is not.
Business income and extra expense
May replace income and pay the additional costs of keeping going while a covered loss stops normal trading.
Common endorsements
Equipment breakdown, spoilage, ordinance or law, and outdoor signage are frequently added where they matter to the operation.
What it does not cover
Property policies are defined as much by their exclusions as their coverage, and two of these catch people out regularly.
Flood
Almost always excluded and bought separately. Being outside a mapped flood zone is not the same as being safe from flooding.
commercial property→Earthquake
Typically excluded and available as its own policy or endorsement, which matters far beyond California.
commercial property→Injury to other people
Somebody hurt on your premises is a liability claim, not a property one.
general liability→Equipment that travels
Tools and equipment away from the premises usually need inland marine rather than a fixed-location property policy.
general liability→Wear, rot and gradual deterioration
Property insurance responds to sudden accidental loss, not to maintenance that was deferred.
business owner’s policy→Who is going to ask you for it
Property coverage is usually required by whoever has a financial stake in the building or the equipment.
- A mortgage lender, as a condition of financing the building
- A commercial landlord, who will require it in the lease and often want to be named
- An equipment lessor or finance company on financed assets
- An investor or franchisor as part of an operating agreement
- Your own risk assessment, since this is one of the few coverages nobody may formally require of a building owner
Own a building, stock or equipment?
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Get a quoteWhat drives the price
Property is rated on what the loss could cost and how likely the building is to have one.
Insured values
The building and business personal property amounts are the base. Understating them to save premium tends to trigger a coinsurance penalty at claim time.
Construction
A masonry building and a frame building of the same size are rated very differently.
Age and condition of systems
Roof, wiring, plumbing and heating age all count, and an old roof is one of the most common reasons a property risk is declined.
Protection
Sprinklers, alarms, and distance to a fire hydrant and fire station.
Location and catastrophe exposure
Wind, hail, wildfire and crime all feed the rate, and in some regions they dominate it.
Occupancy
What happens inside the building. A restaurant kitchen and an accountancy office in the same shell are not the same risk.
Replacement cost or actual cash value
Replacement cost does not deduct for depreciation and costs more. Actual cash value does, and is felt most sharply on roofs and older contents.
Frequently asked questions
What is commercial property insurance?
It is coverage for physical loss or damage to the property your business owns or is responsible for, including the building, equipment, stock and fit-out, and usually the income lost while a covered loss stops you trading. Exactly what is covered depends on the policy form.
I lease my space. Do I still need it?
Generally yes. The landlord insures the building, not your contents, and usually not the fit-out you paid for. Most commercial leases also require the tenant to carry property coverage on their own property and improvements.
What is the difference between replacement cost and actual cash value?
Replacement cost pays to replace with new of like kind and quality without deducting for age and wear. Actual cash value deducts depreciation first. The gap is widest on roofs, vehicles and older equipment, and it is worth knowing which one you have before a loss rather than after.
What is coinsurance?
A clause requiring you to insure to a set percentage of full value, commonly eighty or ninety percent. If you are insured for less, the claim payment is reduced by roughly the same proportion, even on a partial loss. It is the most common reason a property claim pays less than the owner expected.
Does it cover flood or earthquake?
Generally no. Both are typically excluded and bought as separate policies or endorsements. Being outside a mapped flood zone reduces the chance but does not remove it, and a large share of flood claims come from outside high-risk zones.
Does it cover tools and equipment I take to job sites?
Usually not once they leave the premises. Property away from a fixed location is generally insured under inland marine, which is built for equipment that moves.
How much does commercial property insurance cost?
It depends on your insured values, the building, its protection and location, and what you do inside it, so no single figure applies. Request a quote for your own property.
Other coverages: business owner’s policy, general liability, commercial umbrella, workers’ compensation.
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