If you’re a new business owner, you may be wondering about the differences between commercial property insurance and liability insurance.
What’s covered under commercial property insurance isn’t immediately clear from the name, and the term “liability insurance” sounds vague outside of insurance circles.
We created this guide to help you understand the differences and similarities between these two key types of coverage.
What’s the difference between Commercial Property & Liability insurance?
Commercial property insurance helps protect the physical items and brick-and-mortar structures you need to operate your business. If something were to happen to your business property, this insurance would cover the costs to repair or replace it.
Liability insurance is a broad term used to describe business insurance that helps protect you financially against losses, damage or injuries your business may have caused.
In short: Commercial property insurance can help cover the things your business owns. Liability insurance can help cover expenses if you are at fault for an injury with the people you interact with (excluding employees) or damage to property you don’t own.
What is Commercial Property insurance?
If something were to happen to your business property, commercial property insurance could help cover the repair or replacement costs.
Coverage often includes fire, water damage, theft, vandalism and other covered events. Just be sure to read your policy documents carefully so you know exactly what is and isn’t covered.
What does Commercial Property insurance cover?
Commercial property insurance can include these four types of coverage:
Goods, gear and inventory: This coverage protects the equipment, furniture and inventory you need to run your business. It’s also known as business personal property insurance or BPP.
Buildings: Commercial property insurance can help pay for repairs to a building that you own and use for business purposes. This coverage typically isn’t necessary if you lease or rent a space.
Business income interruptions: This coverage applies when you need to temporarily shut down your business due to a covered event, such as a fire or water damage. Business income insurance replaces lost income and helps cover operating expenses like payroll and utility bills. If necessary, it can also help with costs to relocate or purchase new equipment.
Equipment breakdowns: This coverage provides financial protection if a power surge or mechanical failure affects your business equipment.
Who needs Commercial Property insurance?
Many business owners rely on equipment, inventory, furniture or a physical space to do business. Because commercial property insurance covers all of these assets, it’s an important layer of protection that business owners often purchase.
If any of the following applies to your business, you can benefit from the protections provided by commercial property insurance:
- I run my business out of a physical location I lease or own (office, store, home, etc.)
- I own or lease equipment or inventory that could get stolen or damaged
- I would need to shut down my business if certain property was damaged or destroyed
Here are a few specific examples to highlight how commercial property insurance protects small businesses:
- Inventory is stolen from an electronics store. Commercial property insurance covers the cost of replacing it.
- A bakery oven malfunctions due to a power surge. Commercial property coverage helps pay for repairs to get it back up and running.
- A severe storm knocks down a tree, damaging the roof of a real estate office. Commercial property insurance helps to cover the repairs.
- A pipe bursts, causing extensive water damage in a beauty salon. Commercial property insurance helps to fix the damage and cover temporary relocation costs.
How much does Commercial Property insurance cost?
Commercial property insurance costs as low as $17 monthly or $205 annually for some businesses. The amount you’ll pay in monthly premiums depends on several factors related to your business operations.**
What NEXT customers typically pay for Commercial Property insurance
At NEXT, 56% of our customers pay less than $25 to $45 per month on commercial property insurance.**
When determining commercial property insurance costs, insurance companies typically take the following factors into account:
- The type of work you do
- Your business location
- How much coverage you want
- Your claims history
- How long you’ve been in business
What is Liability insurance?
Liability insurance is a broad term used to describe several types of business insurance that protect against losses, damage or injuries that your business may have caused.
What does Liability insurance cover?
There are several types of liability insurance. Each type of liability insurance covers different kinds of accidents you may encounter on the job.
Visit the links below to learn more:
- General liability
- Professional liability (also called errors & omissions)
- Product liability
- Liquor liability
- Employment practices liability
- Commercial auto insurance
Who needs Liability insurance?
Almost all businesses need some type of liability insurance. General liability insurance is one of the most common types of liability coverage, but many businesses have more than one type of liability coverage for comprehensive protection.
There following are just a few examples of how liability insurance can help to protect small businesses:
- A product used by a hair stylist causes a client to have an allergic reaction at the salon. General liability insurance can cover medical expenses and legal fees.
- An accountant makes a mistake on a form that leads to tax penalties. Professional liability insurance can help cover the client’s financial damages.
- Expired snacks purchased at a convenience store cause food poisoning. Product liability coverage can help cover the costs of any resulting lawsuits.
- An intoxicated restaurant customer stumbles and knocks another patron down, causing an injury. Liquor liability coverage can help pay for their medical expenses.
How much does Liability insurance cost?
The costs for different types of liability insurance vary. The lowest monthly premium amounts for a few of the most common types of liability insurance are as follows:
- General liability insurance costs as little as $11 monthly
- Professional liability insurance costs as little as $18.34 monthly
- Commercial auto insurance costs as little as $12.50 monthly
For each type of liability insurance, the exact price you’ll pay depends on a number of factors, such as the type of work you do and where your business is located.
How do Commercial Property insurance and Liability insurance overlap?
Like commercial property, liability insurance helps protect your business from unforeseen accidents that can lead to significant financial damages. And depending on the circumstances, clients may require you to show proof of commercial property insurance and/or liability coverage before they’ll agree to do business with you.
In terms of coverage, however, these two types of insurance do not overlap. They cover different types of business accidents and scenarios.
Are Commercial Property and Liability insurance policies always separate?
Commercial property insurance and liability insurance is sometimes bundled in what is known as a business owner’s policy or BOP insurance.
This coverage provides all the benefits of property insurance with protections from general liability insurance of injuries that happen to people who are not your employees and damage to property that doesn’t belong to you.
Learn more about business owner’s policies.
Do I need both types of insurance?
Whether you need commercial property and liability insurance depends on the type of work that you do.
Many businesses buy general liability insurance since it covers common risks that businesses owners face every day. Additional liability coverage will depend on the types of risks you face in your industry.
Commercial property insurance can help any business that has inventory, relies on equipment to run their business or operates out of a brick-and-mortar location.
Can you get Commercial Property coverage without Liability coverage?
Yes. You can purchase only a commercial property policy if you wish. However, keep in mind that liability coverage is highly recommended for most businesses.
How NEXT helps small businesses get coverage
Getting the right coverage is essential for protecting your small business. At NEXT, we make it easy to get customized, affordable business insurance packages that meet your needs.
Finding the right insurance policies for you is easy with our online application.
Start by answering a few simple questions. Then, you can review your policy options, select the ones you want and get a certification of insurance available for instant download.
It only takes about 10 minutes, and we include up to a 10% discount for any insurance packages that include two or more policies.
Get your instant insurance quote at NEXT today.