Commercial fire insurance: 10 tips to reduce the risk of a fire at your business

Learn what commercial fire insurance is, what it covers and what it costs to help protect your small business.

Jessica Crosby
By Jessica Crosby
Published Oct 16, 2023
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commercial fire insurance

Every 23 seconds, a fire department responds to a fire. Fear of fire affecting your small business is justified. And commercial fire insurance could help you out if it does.

Much of commercial fire insurance protection comes from the right commercial property insurance. But you may need to go beyond a commercial property policy.

Jump ahead to learn how to protect your business against fire:

What is commercial fire insurance?

Commercial fire insurance helps provide financial reimbursement for fire-related damage to your business.

To insure against fire damage, your best bet is to purchase multiple types of insurance policies to give your business a package of protection. Typically, commercial fire insurance is not a single insurance company policy. It’s insurance coverage that combines different types of insurance policies to give your business a package of protection.

Commercial fire insurance could include:

Commercial property insurance

Commercial property insurance protects the physical assets in your business that you own, including structures, inventory, equipment and other business property. (Similarly, commercial lease insurance helps protect the property you rent.)

Often, commercial property insurance covers damages from fire; be sure to look into your specific coverage. For example, some policies may not cover outdoor areas of a commercial building, so outside structures like signs may not be part of your coverage.

You may also want to look into whether your policy covers smoke damage. It can be common to find smoke residue in places far from the fire location, such as outside areas, ductwork and doors.

In the event of a filed claim, many commercial property insurance policies let you choose between being reimbursed the actual cash value of lost/damaged items or the replacement value (also called replacement cost) for brand-new items. On most policies, you will pay a higher premium for a replacement value policy.

General liability insurance

General liability covers third-party injury and property damage. Commercial general liability insurance can cover customers and other non-employees if they’re injured in a fire. It can also help protect from damages to your neighbor’s property because of a fire that started on your property.

A business owner’s policy (BOP)

A business owner’s policy, also known as BOP insurance, bundles general liability insurance and commercial property insurance into one policy. This coverage works well for many small business owners because it protects your business property and your business from some liability.

Business income insurance

A fire can force your business to close temporarily and lead to lost income. Business income insurance, also called business interruption insurance, can help to cover your losses. It’s often a rider (an added-on protection) for commercial property insurance or BOP insurance.

What does commercial fire insurance cover?

All coverage is different, so check your policies carefully to determine if your business has coverage for fire. Covered events can vary depending on the source of the fire and the type of damage incurred.

Commercial fire insurance is typically a part of a policyholder’s commercial property insurance, general liability insurance and your business owner’s policy (BOP), that combines commercial property and general liability to help protect small businesses. Commercial property insurance can help you get back on your feet after a fire. General liability can help protect you from the claims of other people damaged by a fire that starts on your property.

A commercial fire policy package may include coverage for:

  • Smoke damage.
  • Property damage caused by firefighters.
  • Damage to neighboring properties from fire.

If a covered fire-related event forces you to close your business for repairs, and your business carries business income insurance, you may also be able to recover lost income.

Here’s what can typically be covered by business income insurance:

  • Relocation and equipment rental
  • Cleaning and repairs
  • Payroll and salary for employees
  • Net income you would have earned
  • Normal operating expenses

Business income insurance usually has a set period of restoration, which means your policy gives you a fixed amount of time to make repairs.*

How much does commercial fire insurance cost?

Typically, you buy commercial fire insurance through your commercial property insurance. You can purchase commercial property coverage for as little as $17 monthly.**

Many factors affect the cost of commercial fire insurance, including:

  • How close you are to a fire department or hydrant.
  • Having fire preparedness items like sprinklers in place.
  • Flammability of materials or items in your business.
  • Your business’s proximity to another high-risk business.
  • Geographic location to wildfire areas.

Is commercial fire insurance included with commercial property coverage?

Yes. Commercial fire insurance is often included with commercial property coverage. Commercial property insurance protects the physical assets that you own in your business, including structures, inventory, equipment and other business property.

Consider additional coverage for more well-rounded fire protection. General liability protects third-party injuries and damages. You may also want to consider a business owner’s policy (BOP) to bundle commercial property and general liability.

You should also consider the aftereffects of a fire. Can your business weather the financial losses and rebuild time to rebound? If not, business income insurance may be right for you.

10 tips to reduce the fire risk of your business

You can do a lot to reduce the fire risk of your business. Here are a few tips to get you started.

1. Inspect fire supplies like extinguishers, alarms and sprinklers regularly. You want a safeguard to work when you need it most.

2. Make sure all employees know where fire suppression supplies are. You can’t be everywhere at once. Train your employees to handle emergencies.

3. Adjust insurance policies for fire if you upgrade equipment. Adequate insurance coverage is one of your best bets to protect your business from financial loss and potential ruin in the event of a covered fire event.

4. Clean all equipment regularly (or hire pros to do it). A leading cause of restaurant fires is dirty kitchen equipment. Do your best to help prevent fires with regular cleaning.

5. Reduce clutter. Don’t give your fire extra fuel with scattered boxes and paper for kindling.

6. Label fire exits and practice fire drills. Your employees need to get everyone out of the building in the event of a fire. You can’t run fire drills with your customers, but well-placed signs can help visitors leave the premises quickly.

7. Clear brush around the building. Natural vegetation can make fires bigger. Clear out any brush that may escalate a fire or make it difficult to extinguish.

8. Ban appliances prone to fires. Some high-risk appliances, like space heaters, are best left at home. Don’t let employees put your business at risk.

9. If you own a restaurant, keep fire suppression up to code. Read more about common restaurant business insurance claims.

10. Prevent further damage if you do have a fire. For example, if your building gets damaged, take the time to prevent further damage from the elements.

How NEXT helps small business owners stay safe

NEXT helps small business owners get the right commercial fire insurance.

We’ll ask you questions about your business, location, the type of work you do and how much coverage you want so you can get a quote. You select your coverage options and purchase online — all in about 10 minutes.

Your certificate of insurance is available immediately, and you can always access it online. If you have questions, our licensed, U.S.-based insurance professionals can help.

Start a free commercial fire insurance quote with NEXT.

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Jessica Crosby
About the author

Jessica spent over a decade working in education before moving into content marketing. She has worked on content marketing campaigns in the edtech, real estate, and personal finance sectors. She has a passion for working with companies that take the time to educate their customers. When she’s not working, she’s probably outside with her two kids.

* To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.
** The cost data presented here are based on NEXT active customers in the U.S. who purchased commercial property insurance over the previous 12 months. These data should not be considered a substitute for obtaining a quote specific to your business. These data were updated in July 2022.
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