What Does a Commercial Property Insurance Policy Cover?

commercial property insurance protects against fire, theft, and natural disasters

Just like you buy regular insurance for your home, you should also buy insurance for your commercial property. Commercial property insurance protects against fire, theft, national disasters, and other unforeseen events. To learn more about what qualifies as a commercial property and what the insurance policies cover, read on below.

How Commercial Property Insurance Works

Commercial property insurance is slightly different from other forms of insurance. While you can purchase an independent policy for your business, you can also bundle it into a Business Owner’s Policy with both property and general liability coverage. Property insurance offers two options: replacement cost or actual cash value. The replacement cost is when the company pays to repair or rebuild your property with the same or comparable quality materials. With actual cash value, the company pays the damaged property’s current value and the cost to rebuild or replace the property.

What Commercial Property Insurance Covers

Commercial property insurance typically protects against events not covered by other forms of insurance. For example, it applies to events like fires, explosions, theft, storms, burst pipes, etc. It covers the physical property, the equipment (both office and manufacturing), inventory, landscaping, and outdoor items like signs.

Property insurance does not cover losses caused by tenants using the building. It also does not apply to certain natural disasters, like earthquakes and floods. These events are covered by specific insurance. Additionally, your coverage options may be different depending on whether you own or lease the building. If you lease your building, check your lease to understand your insurance responsibilities. 

Factors That Increase Policy Cost

Many of the factors that can increase the cost of your property insurance are based on fire risk. In particular, the location, type of building, occupancy, and risk are all major factors that can increase your cost. Buildings in cities or towns typically cost less to insure because fire services are more readily available. Buildings made of materials that can withstand fires for longer are less expensive to insure. The type of building occupant can also affect the risk, meaning that a restaurant is more likely to have a fire than an office building. Lastly, reducing risks by using anti-theft systems and sprinkler systems will save you money on your premium.


Commercial Property Insurance is slightly more complicated than your typical homeowner’s insurance. We can help. Call a Redwood Agent to get started today!