When you buy something using?links found on our site, we may earn a small affiliate commission. This content?is reviewed &?supervised by?The?Los Angeles Times Commerce Team.
*Applies to quotes made through Insureon only. Average monthly premium calculations are estimates and may vary by state, insurance provider, and the nature of your business. Where required or allowed by state law, insurance taxes, service fees, and other surcharges may be included and billed separately from the premium.
Commercial property insurance covers the cost of repairing or replacing business property that has been stolen, lost, or damaged.
Comprehensive business property insurance will typically cover damage to the building you own or rent as well as the contents inside.
There are many specific subsets of commercial property insurance, including inland marine insurance, BPP insurance, commercial auto insurance, and more. These are not as comprehensive but can be good for covering specific items and certain scenarios.
The best way to save on commercial property insurance is to buy a Business Owner Policy that includes commercial property coverage and general liability insurance.
On average, small businesses pay $67/month for commercial property insurance, whereas BOPs average around $57/month and include general liability coverage.
We recommend using an online quote tool to easily find the right insurance plan for your business and get same-day coverage.
Commercial property insurance is one of the most important business insurance coverages to have as it covers the cost of repairing or replacing business property that has been stolen, lost, or damaged.
It typically includes protection of your business’s building and other assets like merchandise and equipment. However, there are also many different subsets of property insurance that you can buy to get coverage tailored to your needs.
It’s important to note that most commercial property insurance policies can cover losses associated with theft, vandalism, fire, lightning, and windstorms, but will not cover earthquakes and floods.
What’s covered by commercial property insurance?
Comprehensive commercial property insurance can cover the following:
Your business’s building (owned or leased)
The fixtures and furniture inside your building
On-site business equipment and supplies
On-site business inventory and merchandise
What’s not covered by commercial property insurance?
Typically you need a separate specialized policy to get coverage for the following:
Flood or earthquake damage
Property in transit or used off-site
Company vehicles and contents
Property stolen by employees
Damage to your client’s property
Each policy is unique, so it’s important to read and understand the details in your policy so you know if you need additional coverage.
Types of commercial property insurance
Commercial property insurance comes in a variety of forms with varying coverage. The type of coverage you need depends on your business, industry, and the type of property the business owns.
Here is a look at the different types of commercial property insurance and what each can cover:
Standard commercial property insurance:
Most commercial property insurance will cover an owned or leased building as well as the contents of the building. This can include things like supplies, merchandise, stock, equipment, furniture and fixtures. It’s the most comprehensive type of property insurance on the market and is usually available as part of a Business Owners’ Policy (BOP).
There are also specialized types of commercial property insurance available for covering specific types of property or scenarios:
Inland marine insurance:
Standard commercial property insurance usually won’t cover things stored or used off-site. Inland marine insurance is a supplemental type of property insurance that protects your property when it’s away from your business, such as when it’s in transport, used for fieldwork, or stored offsite.
Business personal property insurance:
BPP insurance covers things like furniture, fixtures, merchandise, and equipment, but does not cover the building. If you rent a building and only need coverage for the contents of the building, then business personal property insurance could be a good fit. This is also ideal for home-based businesses as it can pick up where your home insurance leaves off.
Commercial auto insurance:
Most commercial property insurance doesn’t automatically cover vehicles belonging to your business. For this, you’ll need to buy commercial auto insurance as a supplement to property insurance. This can cover losses and damage associated with your business vehicles including theft and damage to the vehicle or its contents.
According to data from our partner Insureon, the average small business pays around $67 per month for a basic commercial property insurance policy, but it can be even cheaper when you bundle it as part of a Business Owner Policy.
*Applies to quotes made through Insureon only. Average monthly premium calculations are estimates and may vary by state, insurance provider, and the nature of your business. Where required or allowed by state law, insurance taxes, service fees, and other surcharges may be included and billed separately from the premium.
That said, how much you’ll pay for commercial property insurance depends on various factors, such as:
Your industry
The value of your property
Your location
Insurance companies typically charge more for potentially high-risk industries, therefore your industry greatly impacts the cost of property coverage.
Here is a look at data from Insureon that details the average monthly cost of commercial property insurance by industry, starting with the cheapest:
Insurance costs are also affected by deductibles and policy limits. You’ll pay more for a policy with a lower deductible or a high coverage limit simply because those factors increase the potential financial risk for the insurance company.
Who needs commercial property insurance?
All businesses that have valuable physical assets or a building to protect should consider having commercial property in place. In fact, some mortgage companies or leasing agencies may require you to have property insurance as part of your contract in an effort to mitigate risk.
That said, here are a few trades that typically purchase commercial property insurance:
Service-oriented businesses:
Service-oriented businesses usually need commercial insurance coverage for equipment, tools, and items they intend to sell to clients as well as the buildings they own or rent.
Professionals:?
Professionals such as lawyers, accountants, or doctors, usually need commercial property insurance to cover their office space or the items in it, such as computers, desks, or specialty equipment needed to provide services.
Retailers:?
Online and brick-and-mortar retailers need commercial property insurance to cover their merchandise, inventory, and equipment. Brick-and-mortar retailers may also need to protect their buildings. However, if you specialize in commercially selling products online, you may also need e-commerce insurance.
Wholesalers:
Similar to retailers, wholesalers also need this type of coverage to protect inventory in their possession before it ships to retailers and others.
Home Businesses:
Home businesses typically need property insurance to cover inventory, equipment, and supplies as these are not usually covered as part of your homeowner insurance plan.
Ultimately, most small businesses can benefit from a business property insurance policy.
How does commercial property insurance reimburse you?
When your property is damaged, stolen, or destroyed, your property insurance will pay to repair or replace the property up to the dollar limits stipulated in your policy. Whether you receive a repair or replacement depends on the reimbursement conditions stipulated in your policy. These can be based on the actual cash value of your property or the replacement cost of your property.
In general, a policy that allows for replacement value will be more expensive than one that provides actual cash value as it doesn’t account for depreciation.
Determining your property’s value
Here is a look at how property can be valued for your insurance plan:
1
Actual cash value
The actual cash value refers to how much your property is worth right now – accounting for depreciation since the original date of purchase. For example, imagine a business purchased a commercial freezer two years ago for $6,000, and the insurance provider deems the useful life of the freezer to be 10 years. Upon reimbursement, the freezer that quit working with 80% more useful life in it (10-2). Therefore the cash value for reimbursement by your insurance would be $4,800, which is 80% of $6,000.
See MoreSee Less
2
Replacement cost value
In the previous example of the freezer, the payout was less than the cost of buying a new freezer meaning the business would be left to absorb the cost difference. In the case of Replacement Cost valuation, reimbursements are based on how much it will cost to replace your property, not the current value of the damaged property. For this reason, a policy based on replacement cost value may be a better option. That said, these policies are also slightly more expensive.
See MoreSee Less
3
Fair market value
Fair market value is often used for determining the value of buildings. This method considers what your property might be worth if it wasn’t damaged or lost and you sold it on the open market. When your insurance policy calls for fair market value compensation, a claims adjuster may consider what products are going for on the markets or consult experts about the value. With this method, there is the potential to receive more money than the actual cash value method due to appreciation, but that’s not guaranteed. Fair market value can be subjective and prices also constantly fluctuate.
See MoreSee Less
Other types of insurance to combine with property coverage
We recommend opting for a BOP plan that includes both general liability coverage and property insurance. Apart from this, you may want to bind extra coverage for certain scenarios.
E&O insurance (a.k.a. professional liability) protects professionals against claims of business negligence, as well as lawsuits resulting from errors or omissions of information offered by company representatives.
Commercial property insurance can pay to repair or replace business property, equipment, and merchandise that has been stolen, lost, or damaged –– includes coverage for buildings you rent or own.
Specialized form of commercial property insurance that covers damage, loss, and theft of physical assets held at a business’ primary location –– It does not cover the building.
Umbrella insurance is a single plan that can flexibly extend general liability, employer liability, & commercial auto insurance limits if you max out on claim limits.
Inland marine insurance covers physical assets like goods and equipment when in transit over land or temporarily stored at off-site locations. It covers movable items not typically covered by standard property insurance.
Malpractice insurance covers certain healthcare professionals against claims of negligence or business malpractice that results in bodily harm to a patient or client.
Cyber liability insurance protects companies’ data & intellectual property from cyber-related risks such as financial losses caused by cyber-attacks, external data breaches, etc.
Is commercial insurance the same as property insurance?
No. Commercial insurance refers to a wide range of policy types that help protect businesses. Property insurance is a specific type of insurance that businesses can purchase to help cover losses if their property is damaged or stolen. Under the umbrella of commercial property insurance, there are numerous types of coverage?you can purchase.
Why is commercial property insurance so expensive?
Not all commercial property insurance is expensive. The cost of this coverage depends on the size of your business, where you’re located, what industry you’re in, and the value of the property you want to cover. It also depends on your policy elections, such as whether you want additional forms of?coverage, high limits, or low deductibles.
Sarah Stasik is well versed in personal finance thanks to her previous role as a Revenue Cycle Manager for a Fortune 500 healthcare company. Using her inside knowledge and expertise, Sarah often covers topics ranging from insurance and the economics of private healthcare to personal finance and small business management.
With more than a dozen years of writing experience, Sarah has tackled niches that range from technical advances in fintech to personal budgeting challenges. She has covered topics such as insurance and the economics of private healthcare, small business management and accounting, and credit and savings. Her writing focuses on making complex or seemingly daunting financial topics more accessible and providing helpful and relevant resources for readers.
LA Times Compare is committed to helping you compare products and services in a safe and helpful manner. It’s our goal to help you make sound financial decisions and choose financial products with confidence. Although we don’t feature all of the products and services available on the market, we are confident in our ability to sound advice and guidance. We work to ensure that the information and advice we offer on our website is objective, unbiased, verifiable, easy to understand for all audiences, and free of charge to our users. We are able to offer this and our services thanks to partners that compensate us. This may affect which products we write about as well as where and how product offers appear on our website – such as the order in which they appear. This does not affect our ability to offer unbiased reviews and information about these products and all partner offers are clearly marked. Given our collaboration with top providers, it’s important to note that our partners are not involved in deciding the order in which brands and products appear. We leave this to our editorial team who reviews and rates each product independently.
Why Trust Us?
At the LA Times Compare our mission is to help our readers reach their financial goals by making smarter choices. As such we follow stringent editorial guidelines to ensure we offer accurate, fact-checked and unbiased information to all readers. Learn how we are compensated by our partners.