Business property insurance protects your physical business assets like computers, inventory, equipment and furniture. After disasters like fires or theft, you pay your deductible and insurance handles the rest of the repair and replacement costs. You can purchase commercial property insurance as a standalone policy or bundle it with general liability and business interruption insurance in a business owner's policy (BOP), which typically saves money compared to buying separate policies.
Business Property Insurance
Business property insurance pays for your equipment, inventory and buildings when fire, theft or disasters strike.
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Updated: October 27, 2025
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Key Takeaways
Business property insurance covers physical assets such as buildings, equipment and inventory from damage or theft.
Building coverage pays for damage to structures you own, while business personal property coverage covers movable items like equipment.
To determine how much coverage you need, consider your total asset value, industry risk level, location factors and future growth plans.
What Is Business Property Insurance?
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COMPLETE YOUR BUSINESS PROTECTION
Commercial property insurance protects your physical assets, but these coverage types address risks that fall outside standard property policies.
- Equipment Breakdown Insurance: Covers mechanical failures, spoilage and business interruption when critical equipment breaks down, which property policies typically exclude.
- Inland Marine Insurance: Protects property in transit, mobile equipment and assets away from your fixed location that standard property coverage doesn't follow.
- Flood Insurance: Required separate coverage for flooding damage since standard commercial property policies explicitly exclude this common and costly peril.
- Earthquake Insurance Protects against seismic activity damage that commercial property policies don't cover, essential if you're in an earthquake-prone region.
- Environmental Liability Insurance: Covers pollution cleanup costs and environmental damage claims that standard property policies exclude, critical for manufacturers and industrial operations.
- Marine Insurance: Covers cargo, vessels and related liability during transportation and storage, protecting goods while they're being shipped domestically or internationally.
Business Property Insurance: Coverage Types and Terms
Business property insurance covers different assets depending on what you choose. These terms matter when shopping for coverage:
Building coverage
Covers the physical structure you own. It includes walls, floors, roofing, plumbing and permanently installed fixtures like built-in cabinets, HVAC systems or mounted security cameras. This coverage only applies if you own the building, not if you rent space.
Business personal property coverage
Protects movable items like computers, inventory, furniture and equipment from covered risks like fire or theft. You'll pay your deductible first, then coverage kicks in for losses above that amount. A restaurant's tables and kitchen equipment fit this coverage, whether you rent or own the location.
Replacement cost coverage
How insurers determine how much you'll receive when filing a claim. If you choose this for your business property insurance policy, you get the full amount to buy new items at today's prices. If thieves steal your $2,000 computer, you'll receive the full $2,000 to replace it, even if you bought it three years ago.
Actual cash value coverage
The other way insurers calculate your payout is by factoring in depreciation. Using that same stolen $2,000 computer from three years ago, you might only receive $800 based on its depreciated value at the time of theft.
What Does Business Property Insurance Cover?
Business property insurance covers sudden, accidental damage from covered risks to your business assets. It doesn't cover gradual damage, natural disasters are not explicitly included, or damage from business operations gone wrong.
A fire damages office equipment | ✅ | A restaurant's kitchen fire destroys ovens, freezers and point-of-sale systems. Fire is a standard covered peril in commercial property insurance policies. |
Thieves break in and steal inventory | ✅ | Burglars steal $15,000 worth of electronics from a retail store overnight. Theft is covered as long as there's evidence of forced entry. |
An employee accidentally breaks equipment | ❌ | A worker drops and breaks a $3,000 printer while moving it. Employee accidents aren't covered, but equipment breakdown insurance could help. |
Vandals spray paint the building exterior | ✅ | Graffiti covers the front of a law firm's office building. Vandalism is a covered peril under most business property coverage. |
An earthquake cracks the foundation | ❌ | A bakery's foundation cracks during an earthquake, damaging ovens and display cases. Earthquake damage requires separate earthquake insurance coverage. |
A burst pipe floods the basement | ✅ | When old plumbing fails, a dental office's basement storage area floods. Water damage from burst pipes is covered, unlike flooding from external sources. |
A power outage spoils refrigerated goods | ❌ | A grocery store loses $8,000 in frozen foods during a three-day power outage. Utility interruption typically isn't covered unless you add this endorsement. |
A hailstorm damages the roof and flooding follows | ✅/❌ | An auto repair shop's roof gets damaged by hail, but the resulting water damage isn't covered. Hail damage is covered, but subsequent flood damage requires flood insurance. |
Note: Coverage examples are for illustration only. Actual coverage depends on your specific policy terms, conditions and exclusions. Coverage availability and definitions may vary by state. Some coverages may not be available in all states. Consult your insurance professional for coverage verification.
How Much Business Property Insurance Do I Need?
Unlike workers' compensation or commercial auto insurance, business property insurance isn't legally required by any state. But it's worth having since one kitchen fire or break-in could easily cost you thousands in equipment replacement, not to mention the revenue you'll lose while getting back on your feet. Many clients and landlords won't work with you unless you have property coverage. Look at these key factors:
- 1What you'd need to replace everything
Think about what it would cost to rebuild your business from scratch: your building (if you own it), equipment, inventory, furniture and even office supplies. That's your starting point.
- 2Your business type
Some businesses are riskier than others, and insurers price accordingly. If you're running a restaurant or manufacturing operation, expect higher premiums than someone with a consulting firm or accounting practice.
- 3Your location
Properties in flood zones or earthquake areas cost more to insure because the risks are real. High-crime neighborhoods mean higher theft risk, and expensive cities translate to higher replacement costs.
- 4Your future plans
You may plan to buy new equipment next year, expand your space, or double your inventory. Make sure your property insurance for business can grow with you instead of leaving you underinsured later.
- 5Review your contracts and agreements
Your lease, business loans or client contracts might specify minimum coverage amounts. Some even require replacement cost coverage instead of the cheaper cash value option.
Who Needs Business Property Insurance?
Every business with physical assets needs this protection, whether you own or rent your space. But some have more to lose than others based on their equipment, inventory and day-to-day risks:
Retail stores
Your inventory, point-of-sale systems and display fixtures represent a large investment. One break-in or fire could wipe out months of profits in merchandise alone.
Restaurants and food service
Kitchen equipment, refrigeration units and dining room furniture aren't cheap to replace. Plus, spoiled food from power outages can create immediate losses.
Manufacturing companies
Heavy machinery, raw materials and finished goods inventory make these businesses especially vulnerable to property losses. When your equipment goes down, your entire operation stops.
Medical and dental practices
Specialized diagnostic equipment like X-ray machines, dental chairs and imaging systems are huge investments. These can cost more than most people's houses, making property coverage essential.
Legal offices
Computers, servers and client files need protection, especially since confidentiality breaches can create serious liability issues. While your property values might be lower than other businesses, the data you store is irreplaceable.
Contractors and tradespeople
Tools, equipment and materials stored at your business location need coverage. Even a minor theft can cost you thousands in replacement tools and delay your projects.
Auto repair shops
Expensive diagnostic equipment, tools and customer vehicles in your care create serious property exposure. Holding someone else's car puts a lot of responsibility on your shoulders.
Consider other business coverage beyond property coverage. General liability insurance protects you when customers get hurt on your premises, while a business owner's policy (BOP) bundles property and liability coverage for less money. Construction businesses especially need tools and equipment insurance since your gear travels to job sites where basic property coverage won't follow.
DIFFERENT RISKS, DIFFERENT COVERAGE
Running a consulting, accounting or IT business means your biggest risks aren't physical. You don't need to insure expensive machinery, but one client claiming you missed a deadline or made an error can trigger a lawsuit costing tens of thousands in legal fees alone. Professional liability insurance covers these disputes.
Since client data is your responsibility, cyber insurance protects your business when breaches happen. It covers everything from notification costs to credit monitoring for affected clients, keeping you operating when digital disasters strike.
Business Personal Property Insurance: Bottom Line
Business property insurance covers your company's buildings, equipment and inventory when damage occurs. The coverage amount you need depends on your asset values, industry risks, location and growth plans. This protection keeps your operations running when fires, theft or other covered events disrupt your business.
Small Business Property Insurance: FAQ
Here are answers to frequently asked questions about business property insurance:
Do I need business property insurance if I rent my office space?
Yes, you still need it. Your landlord's insurance only covers the building, not your equipment, inventory or furniture. Many commercial leases require tenants to carry this insurance for their business contents.
How do I calculate how much business property coverage I need?
Start by considering everything you'd need to replace: equipment, inventory, furniture, supplies and building value (if you own it). Calculate replacement costs, factor in industry risks and location hazards and review minimum lease requirements.
What business property insurance requirements exist by state?
No state legally requires business property insurance. However, commercial leases often require it, business loans may demand it for collateral protection and some clients won't work with uninsured vendors.
Is business interruption insurance included with business property insurance?
Business property insurance policies don't automatically include business interruption coverage, which replaces lost income when damage forces temporary closure. However, you can have it as an add-on or endorsement.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
He writes about economics and insurance, breaking down complex topics so people know what they're buying.