Business Property Insurance: What Does It Cover? (2025)

Key Takeaways

Business property insurance covers physical assets such as buildings, equipment and inventory from damage or theft.

Building protection coverage pays for costs from damages to structures you own, while business personal property coverage covers movable items like equipment.

To gauge how much coverage you need, consider your total asset value, industry risk level, location factors and future growth plans.

What is Business Property Insurance?

Business property insurance covers the stuff that makes your business run: computers, inventory, equipment, furniture. If a fire breaks out or thieves strike, you'll pay your deductible, then insurance picks up the rest of the repair and replacement costs. It's your financial safety net when things go wrong.

Property insurance for business and commercial property insurance are the same, and the terms are used interchangeably. For cost savings, you can purchase business property insurance as a standalone policy or bundled with general liability in a business owner's policy (BOP).

Business Property Insurance: Coverage Types and Terms

Business property insurance covers different things 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

One of the valuation methods (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 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.

Disclaimer

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.

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. Plus, many clients and landlords won't work with you unless you have property coverage.

Look at these key factors:

1
What you'd need to replace everything.
Think about what it would cost to rebuild your business from scratch, from your building (if you own it), equipment, inventory, furniture and even office supplies. That's your starting point.
2
Your 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.
3
Your 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.
4
Your 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.
5
Review 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

We've answered the most frequently asked questions about business property insurance below:

How much does business property insurance cost per month?

Costs vary widely depending on what you do and where you're located. Low-risk service businesses pay much less than high-risk operations like restaurants or manufacturing. Disaster-prone areas and high-crime neighborhoods cost more than rural locations.

What's the difference between business property insurance and general liability insurance?

Property insurance covers your physical assets when damaged or stolen. General liability protects you when someone claims you injured them or damaged their property. Most businesses need both types of protection.

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 thinking about everything you'd need to replace: equipment, inventory, furniture, supplies and building value (if you own it). Add 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 need it, business loans may demand it for collateral protection and some clients won't work with uninsured vendors.

Does business property insurance cover equipment breakdown?

Basic coverage protects equipment from fire, theft and vandalism, plus some electrical damage like lightning-related power surges. However, internal electrical failures, mechanical breakdowns and comprehensive power surge protection require separate equipment breakdown insurance as an add-on.

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!

Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.

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Business Property Insurance