Business Renters Insurance: A Guide for Business Owners

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For businesses with physical properties like storefronts, inventory warehouses, or factory floors, commercial space is indispensable. However, commercial property adds to your risk as a business owner—if something goes wrong on your premises, the responsibility could fall on you. Luckily, there are small business insurance policies for precisely this type of risk management: business renters insurance.

What is business renters insurance?

Business renters insurance is an insurance policy or combination of policies designed to protect businesses that rent commercial space for their operations, such as storefronts, offices, and warehouses. Like residential rental insurance, business renters insurance can include liability coverage and property coverage. Business renters insurance provides financial protection for unforeseen events like fire, theft, and similar risks.

Landlords who rent commercial properties sometimes require business owners to carry business renters insurance. While your landlord’s policy might cover damage to the commercial property itself, it doesn’t cover damage to your business property or shield your landlord from liability for accidents or injuries on their property.

3 Types of business renters insurance

  • Commercial property insurance
  • General liability insurance
  • Business interruption insurance

Business renters insurance refers to any policy (or policy combination) that protects business owners who rent commercial space. There are three main types of business renters insurance:

  • Commercial property insurance. Commercial property insurance covers damage to commercial property and may cover damage to or loss of equipment and inventory.
  • General liability insurance. General liability insurance protects business owners from liability for accidents that occur on commercial property.
  • Business interruption insurance. Also known as business income insurance, this covers lost income due to natural disasters or property crimes.

These three insurance types are frequently bundled in an insurance package known as a business owner’s policy.

What does business renters insurance cover?

  • Property damage
  • Damage or loss of equipment or inventory
  • Accidents
  • Loss of income

Different types of business renters insurance policies offer different types of coverage, and their scope can vary considerably across plans. For example, some policies only provide property damage coverage, and many exclude certain types of incidents, like floods. Carefully reviewing policy provisions and exclusions can help you select the correct type of insurance. Here are a few incidents business renters insurance commonly covers:

  • Property damage. Commercial property insurance covers your business’s commercial property—i.e., physical assets—against physical loss or damage from fire, theft, natural disaster, and other forms of loss or damage. If clogged pipes cause your restaurant’s kitchen sink to back up, commercial property insurance can cover the repairs. For a complete list of covered incidents, consult your policy’s causes of loss forms, which outline the specific incident types covered by your plan.
  • Damage or loss of equipment or inventory. Some commercial property insurance plans also cover damage to or loss of equipment or inventory—also known as business personal property. If a leaky sprinkler short circuits your office computers, commercial property insurance can help you purchase new equipment.
  • Accidents. General liability insurance protects business owners from liability for accidents on their commercial property resulting in bodily injury to a non-employee or damage to non-business property (i.e., a customer’s personal property). If your storefront sign falls through the windshield of a customer’s car, your general liability insurance may provide coverage for medical costs, property damages, and legal fees.
  • Loss of income. Business income insurance (also known as business interruption insurance) provides coverage for business income lost due to natural disasters, fire, vandalism, or theft. If a tornado flattens your toyshop, business income insurance can replace your income until your business is back up and running again.

Note that professional liability insurance (which covers reputational damage to your business) and workers’ compensation insurance (which covers medical treatment and lost wages for employees in the event of work-related injury or illness) are not typically included in business renters insurance policies.

Replacement cost vs. actual cash value

When selecting an insurance plan, you may have to choose between two calculation methods providers use to reimburse you after a covered loss: “replacement cost” and “actual cash value.” Both approaches have pros and cons. Here’s how they differ:

  • Replacement cost. While replacement cost plans tend to come with higher premiums, they insure the total cost of replacing lost assets or repairing commercial property damage, with no deduction for depreciation. For example, if someone steals your business’s five-year-old computer, the claims payment allows you to buy a new computer with as similar features as possible to the stolen model.
  • Actual cash value. Actual cash value insurance reimburses you for the value of the lost property, accounting for depreciation. If your five-year-old sewing machine is damaged in a fire, your insurance company determines the current value of this machine and provides this amount as a payment. Depending on the type of property you rent and the value of its equipment and inventory, actual cash value reimbursement may fall significantly short of the cost of repairing a property or replacing lost equipment.

Who needs business renters insurance?

Any business entity renting commercial property can benefit from business renters insurance, like a dentistry practice that rents office space with expensive medical equipment, an antique dealership that stores valuable furniture in a rented warehouse, or a yoga teacher who conducts classes in a rented studio.

To protect their properties and shield themselves from potential liability, some commercial landlords require business owners to obtain business renters insurance coverage. 

How to get business renters insurance

Navigating the small business insurance marketplace can be tricky. To obtain insurance, you can either work with an insurance broker, compare policies through an online marketplace, or directly contact insurance companies for quotes and plan specifics. 

Regardless of your chosen method, finding business renters insurance involves soliciting quotes from multiple companies and comparing insurance rates and policy details. To receive a quote, you or your insurance broker usually submit an application with details about your business. Here’s a list of information you’ll want to have on hand:

  • Business, name, address, and contact information
  • Business type and activities
  • Years in operation
  • Annual revenue
  • Approximate value of assets needing coverage
  • Any current insurance coverage information
  • History of prior insurance claims

Business renters insurance FAQ

What is the difference between business renters insurance, a business owner’s policy, and general liability insurance?

Business renters insurance protects the property you rent for your business. This type of small business insurance helps protect your property, team, and operations.

A business owner’s policy (BOP) is a small business insurance package deal. BOPs often contain commercial property insurance (business renters insurance), general liability insurance, and business interruption insurance.

General liability insurance is a type of business renters insurance. It is an individual policy that protects business owners from liability for accidents on commercial property and can be included in a BOP. General liability insurance does not cover damage to property (or inventory or offer compensation for business interruption).

Why do I need business renters insurance?

For a business owner, a catastrophic incident might not only mean the need to rebuild and replace damaged equipment. Business renters insurance covers damages or theft made by a third party. Damages to or theft of any equipment, inventory or property you store within the space. Damages to the property as a result of fire, natural disasters and other unexpected events.

What are the three types of business renters insurance?

  • Commercial property insurance
  • General liability insurance
  • Business interruption insurance