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Small Business

Commercial Property Insurance: How coverage protects your business

Matt Nezamabadi image
By Matt Nezamabadi
Feb 10, 2021 min read

Commercial property insurance is one of the most common types of small business insurance people buy because of the different types of coverage it offers.

It can protect your inventory, equipment and even the building where you work — basically, all the stuff you need to do business. 

When you have property insurance, you’ll have help with replacement or repair costs if property is stolen or damaged due to a covered event, such as a burst water pipe, fire, tornado or vandalism.

And it can help you whether you lease space or own the property where you work.

In this article, we'll take a closer look at the four main types of coverage commercial property covers:

The different types of business property insurance coverage

Commercial property insurance offers different types of coverage depending on your business. 

For example, if you rent a commercial space for your business, you might only need the protection known in the industry as “business personal property” coverage. If you own the space, you might also have building coverage in your insurance package.

There are four basic types of coverage included with commercial property insurance that we will share details about in the sections below. 

Business personal property (BPP) coverage for your goods and gear

You’ve probably heard the expression “everything but the kitchen sink.” Well, business personal property covers almost everything but the building where you do business. 

Let’s say you rent a space on Main Street for your boutique or restaurant. If you were to take the building, turn it upside down and shake it, almost everything that falls out would be covered by business personal property insurance (up to your policy limit, some exclusions apply).

BPP can also provide coverage for fixed items, such as countertops, built-in cabinets, fixtures and flooring.

We hope that some strange force doesn’t pick up and shake your building anytime soon. In the more likely event of a burst pipe or fire, your insurance would help pay the repair or replacement costs for your stuff that is damaged or destroyed.

Building coverage for structural damage

You can think of building coverage as the opposite of business personal property coverage. It only covers the building, not all of the stuff inside.

For example, let’s say you have a coffee shop and own the commercial space where it’s located. If a tree falls and crashes through the building’s roof, this type of coverage will pay to repair or rebuild the structure.

But building insurance won’t cover the cost to replace your espresso machine or any other equipment and inventory that was inside when the tree fell. Business personal property takes care of that.

If you own the building where your business operates, you need this type of coverage. If you’re leasing or renting the space, you can probably skip it.

Get commercial property coverage for your business

Business income coverage for unexpected closures

Also known as business interruption insurance, business income coverage helps replace lost income if you temporarily need to shut down your business because of a covered event.

This coverage became a hot topic during the pandemic because most insurance companies, including Next, exclude business interruptions caused by viruses and shelter-in-place closures.

Here’s an example where business income would provide coverage:

Let’s say you own the commercial space where your clothing boutique is located and there’s a fire. The inspector says it’s not safe to occupy the property until it’s repaired, which will take two months. Business income insurance could help you:

  • Replace the income you would have earned during that time 
  • Pay for everyday operating expenses such as utility payments and payroll
  • Cover extra costs you might incur to get your business up and running faster, such as relocating or purchasing new equipment.

It’s particularly important for businesses with physical locations that wouldn’t be able to easily move their operations, such as restaurants, salons, photography studios and florists.

An important note about non-covered events

Business income insurance covers a lot, but it doesn’t cover everything. 

If you have to shut down due to a non-covered event, you won’t have financial help. It’s important to read your policy exclusions carefully before you purchase coverage.

Typical exclusions include earthquakes, floods, viruses and government action and other events.

Equipment breakdown coverage for mechanical failures

Equipment breakdown is different from the other types of coverage we’ve discussed, which kick in when external forces affect your ability to run your business. 

Equipment breakdown coverage protects you when there’s internal damage to a piece of equipment that causes it to malfunction. It’s designed to cover many types of mechanical failures, such as short circuits, power surges and loss of air pressure.

For example, let’s say you own a restaurant and the motors in your refrigerators and freezers stop working. Equipment breakdown coverage could pay to have them repaired or replaced up to your policy limit.

How to get commercial property insurance with Next

Getting the property insurance you need to protect your business is fast, easy and affordable with Next Insurance — and you can do it all online.

Our business personal property coverage and business income protection are available now. Our building insurance and the equipment breakdown coverage will be available later this year.

If you’re ready to explore your options, start a free instant quote

We’ll ask you a few questions about your business, location, the type of work you do and how much coverage you want so that we can give you a quote. Then you can select your coverage options and purchase your policy.

Your certificate of coverage will be available immediately, and the entire process only takes less than 10 minutes.

If you have questions, our licensed, U.S.-based insurance professionals are available to help.

Get your small business property insurance quote today.

Matt Nezamabadi image
By Matt Nezamabadi
Matt Nezamabadi is the commercial property insurance product lead at Next Insurance.
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