Exploring the Depths of Commercial Property Insurance: What’s Covered?

Discover what does a commercial property insurance policy cover, including buildings, equipment, and more. Get insights into key perils and exclusions.


If you’re asking yourself, “What does a commercial property insurance policy cover?”, then you’re in the right place. We can quickly answer that for you:

  1. Your Building: Protects the structure including completed additions and fixtures.
  2. Business Personal Property: Covers items inside your building such as furniture, machinery, and stock.
  3. Personal Property of Others: Insures items in your care, like customer-owned property.

Owning or renting a commercial property comes with unique risks. Whether you’re safeguarding a retail store, office, or warehouse, having the right insurance is crucial. Commercial property insurance helps protect your business from financial losses due to damage from perils like fire, theft, and natural disasters.

Why is this coverage so important? Because it ensures that your investment is secure, allowing you to focus on running your business. Even if you never file a claim, the peace of mind that comes with being well-protected is invaluable.

Ready to dive deeper? Let’s explore what exactly is covered under a commercial property insurance policy.

quick overview of commercial property insurance coverage - what does a commercial property insurance policy cover infographic step-infographic-4-steps

What Does a Commercial Property Insurance Policy Cover?

Types of Properties Covered

Commercial property insurance can cover a wide range of physical locations where you conduct business. This includes both owned and rented properties as long as they are listed as insured locations on the policy.

Office Buildings

Office buildings, whether you own or lease them, are covered under commercial property insurance. For instance, if a fire damages your office, the policy will help cover the repair costs.


Warehouses are another type of property commonly covered. This is crucial for businesses that store large amounts of inventory or equipment. Imagine a scenario where a burst pipe floods your warehouse. Commercial property insurance can help cover the cost of repairs and damaged inventory.

Types of Assets Covered

Commercial property insurance doesn’t just cover the buildings themselves. It also protects various tangible assets within those buildings.

Fixtures and Equipment

From fixtures like lighting and plumbing to machinery and equipment, these essential items are covered. For example, if a lightning strike damages your factory’s machinery, the policy will cover the repair or replacement costs.


Inventory is another critical asset covered. Whether you run a retail store or a manufacturing unit, having your stock insured means you won’t be left high and dry if something goes wrong. For instance, if theft occurs, the insurance can help replace the stolen goods.

Supplies and Other Tangible Property

Beyond equipment and inventory, general supplies and other types of tangible property are also covered. This can include office supplies, furniture, and even leased personal property for which you have a contractual responsibility to insure.

Personal Property of Others

An often overlooked but essential aspect of commercial property insurance is coverage for the personal property of others. If you have clients’ or customers’ property in your care, custody, or control, this coverage can be a lifesaver. For example, if a client’s equipment gets damaged while on your premises, the policy will cover the loss.

Quick Tip: To easily distinguish between what is covered under building vs. business personal property, imagine flipping your building upside-down. Anything that falls out qualifies as business personal property. The rest is covered under your building limit.

office building

Understanding what a commercial property insurance policy covers can help you make informed decisions and ensure that all aspects of your business are protected. Let’s move on to discuss the key perils and exclusions in commercial property insurance.

Key Perils and Exclusions in Commercial Property Insurance

Commercial property insurance is essential for protecting your business from various risks. However, it’s crucial to understand both the perils covered and the common exclusions to avoid surprises during a claim.

Common Perils Covered

Fire: One of the most common and devastating risks to a business. For example, if a fire destroys your office equipment, commercial property insurance will typically cover the damage.

Theft: Coverage for theft is vital, especially if you have significant amounts of valuable equipment or inventory. However, be cautious; some policies might exclude theft, so always check your policy details.

Vandalism: Acts of vandalism can lead to costly repairs. Most commercial property insurance policies cover damages resulting from vandalism.

Lightning: Damage from lightning strikes, such as fires or electrical surges, is usually covered. This is particularly important for businesses with sensitive electronic equipment.

Wind: Wind damage, including from hurricanes and tornadoes, is typically included. However, there may be specific limitations or exclusions depending on the region, especially in areas prone to such events.

Common Exclusions

While commercial property insurance covers many risks, some perils are typically excluded:

Floods: Standard commercial property insurance does not cover flood damage. Businesses in flood-prone areas need separate flood insurance.

Earthquakes: Similar to floods, earthquake damage is generally excluded and requires a separate policy.

Intentional Damage: Any damage caused intentionally by the business owner or employees is not covered. Insurance policies are designed to protect against accidental losses, not deliberate actions.

War and Military Action: Damage resulting from war or military actions is excluded. This is a standard exclusion across most insurance policies.

Nuclear Hazard: Any damage caused by nuclear reactions or radiation is not covered. This type of risk requires specialized insurance.

Normal Wear and Tear: Over time, buildings and equipment naturally degrade. Damage from normal wear and tear is not covered, as maintaining the property is the owner’s responsibility.

Terrorism: While some policies may offer limited coverage, terrorism is often excluded. Businesses concerned about this risk should consider a specialized terrorism insurance policy.

Understanding these exclusions is essential for comprehensive risk management. You may need additional policies to cover these gaps, especially if your business is in a high-risk area.

Next, we’ll explore the different levels of coverage available in commercial property insurance.

Levels of Coverage: Basic, Broad, and Special Forms

When it comes to commercial property insurance, there are three main levels of coverage: Basic Form, Broad Form, and Special Form. Each offers different levels of protection, so understanding the distinctions can help you choose the right policy for your needs.

Special Form Coverage

The Special Form, often referred to as “all-risk” coverage, is the most comprehensive option. Unlike the Basic and Broad forms, which specify covered perils, the Special Form covers all direct physical damage to your property unless explicitly excluded.

Here’s why the Special Form is highly recommended:

  • All-Risk Coverage: This means that unless a peril is specifically excluded, it is covered. This broad scope reduces the risk of gaps in coverage.
  • Burden of Proof: In the event of a claim, the insurance company must prove that the damage is excluded. This often makes it easier for policyholders to get their claims paid.

However, it’s important to note that “all-risk” doesn’t mean “no exclusions.” Common exclusions typically include things like wear and tear, floods, and earthquakes. Always read the policy details to understand these exclusions.

Broad and Basic Form Differences

The Basic Form and Broad Form are more limited in scope compared to the Special Form. They cover only specific perils listed in the policy.

Basic Form covers the following perils:

  • Fire
  • Lightning
  • Explosion
  • Smoke
  • Windstorm
  • Hail
  • Riot or civil commotion
  • Vandalism
  • Damage caused by aircraft or vehicles
  • Sprinkler leakage
  • Sinkhole collapse
  • Volcanic action

Broad Form builds on the Basic Form by adding additional covered perils:

  • Falling objects
  • Weight of snow, ice, or sleet
  • Water damage from appliance leakage
  • Collapse from specified causes

In summary:

  • Basic Form: Covers a limited list of perils.
  • Broad Form: Includes all Basic Form perils plus additional ones.
  • Special Form: Covers all perils unless explicitly excluded.

Additional Coverages and Endorsements

When it comes to commercial property insurance, standard coverage might not be enough for your business. That’s where additional coverages and endorsements come into play. These options can provide extra layers of protection tailored to your specific needs.

Business Interruption Coverage

Imagine a scenario where a fire damages your office building, forcing you to halt operations temporarily. Not only would you face repair costs, but you’d also lose income during the downtime. Business interruption coverage becomes invaluable here, helping cover lost income and operating expenses while your business recovers from a covered peril.

Equipment Breakdown Coverage

Your business likely relies on various types of machinery and equipment. Whether it’s your HVAC system, CNC machines, or electrical systems, a breakdown can disrupt operations and lead to significant costs. Equipment breakdown coverage steps in to protect against these risks.

Inland Marine Coverage

If your business involves transporting goods or valuable items, inland marine coverage is essential. This coverage protects property in transit or stored off-site. It’s especially useful for contractors, fine art dealers, and businesses with valuable papers.

Valuation Methods: Ensuring Adequate Compensation

Understanding how your commercial property is valued is crucial to ensure you get the compensation you need when something goes wrong. There are three main valuation methods: Replacement Cost, Actual Cash Value, and Functional Replacement Cost.

Replacement Cost Coverage

Replacement Cost Coverage is the gold standard. It covers the cost to repair or replace your property with new materials of comparable quality, without factoring in depreciation. This means if your building or equipment is damaged, your policy will pay for new items, ensuring you can rebuild or replace without worrying about age or wear and tear.

For example, if a fire destroys your office equipment, replacement cost coverage will pay for brand-new equipment, even if the cost is higher than what you originally paid.

Actual Cash Value and Functional Replacement Cost

Actual Cash Value (ACV) is a bit different. It covers the replacement cost minus depreciation. This means if your 10-year-old equipment is damaged, the payout will reflect its current value, not the cost to buy new equipment. This can leave you with a significant out-of-pocket expense.

Functional Replacement Cost is a middle ground. It allows you to replace your property with modern equivalents that are functionally similar but may not be identical. For instance, if your building has rare materials, you can replace them with more common, less expensive options that serve the same purpose.

Depreciation and Modern Equivalents

Depreciation can significantly impact your claim. With ACV, the older your property, the less you get paid. On the other hand, Functional Replacement Cost offers a practical solution by letting you replace outdated or rare materials with modern, efficient alternatives.

In summary, choosing the right valuation method is essential. Replacement Cost offers the most comprehensive coverage, while Actual Cash Value can leave you underfunded. Functional Replacement Cost provides a balanced option, especially for unique or older properties.

Next, let’s dive into some frequently asked questions about commercial property insurance.

Frequently Asked Questions about Commercial Property Insurance

What is typically excluded from commercial property insurance?

While commercial property insurance covers a wide range of risks, there are several common exclusions:

  • Flood: Damage caused by flooding is generally not covered. You’ll need a separate flood insurance policy.
  • Earthquake: Earthquake damage is also excluded and requires a specialized policy.
  • Terrorism: Acts of terrorism are typically not covered unless you have a specific endorsement.
  • War and military action: Any damage resulting from war or military actions is excluded.
  • Intentional damage: Any damage you or your employees intentionally cause won’t be covered.
  • Nuclear hazard: Damage from nuclear incidents is excluded.
  • Normal wear and tear: Regular deterioration of property over time is not covered.

These exclusions mean you might need additional policies to cover these risks fully. Understanding these can help you avoid surprises when filing a claim.

How do I value my property for insurance purposes?

Valuing your property accurately is crucial for adequate coverage. Here’s how to do it:

  1. Inventory Your Assets: List all physical assets, including buildings, equipment, and inventory.
  2. Determine Replacement Cost: Calculate how much it would cost to replace your assets with new ones of similar quality.
  3. Consider Depreciation: For Actual Cash Value (ACV) policies, subtract depreciation from the replacement cost to get the current value of your assets.
  4. Consult an Expert: Work with an insurance agent to ensure all assets are accounted for and valued correctly.

Taking these steps will help you determine the right level of coverage and avoid being underinsured.

What additional coverages should I consider?

Besides standard coverage, several additional coverages can offer extra protection:

  • Business Interruption: Covers lost income and operating expenses if your business is non-operational due to a covered claim.
  • Equipment Breakdown: Protects against damage to essential machinery like HVAC systems, boilers, and manufacturing equipment.
  • Ordinance and Law Coverage: Covers the cost of bringing your building up to current codes if you need to rebuild after a covered loss.

These additional coverages can provide a more comprehensive safety net for your business, ensuring you’re prepared for various scenarios.

Next, we’ll explore the specific endorsements and how they can tailor your policy to meet your unique needs.


At Griffith & Harris Insurance Services, we understand that every business is unique, and so are its insurance needs. Our goal is to provide comprehensive coverage options that ensure your business is protected from unforeseen events.

Griffith E. Harris Insurance Services

With over 75 years of serving the Greenwich community, we have built a reputation for delivering personal service with integrity. Our team of experienced insurance agents is dedicated to understanding your business and providing tailored solutions that fit your specific requirements.

Comprehensive Coverage Options

We offer a range of commercial property insurance options designed to protect your business assets, including:

  • Buildings and Structures: Whether you own or lease your business premises, we cover the physical structure against perils like fire, theft, and natural disasters.
  • Office Equipment and Inventory: From computers to manufacturing equipment, we ensure that your essential business assets are covered.
  • Business Interruption: Our policies can cover lost income and ongoing expenses if your business is temporarily non-operational due to a covered claim.
  • Equipment Breakdown: Protects against damage to essential machinery like HVAC systems, boilers, and manufacturing equipment.
  • Ordinance and Law Coverage: Covers the cost of bringing your building up to current codes if you need to rebuild after a covered loss.

These additional coverages can provide a more comprehensive safety net for your business, ensuring you’re prepared for various scenarios.

Ready to explore the depths of commercial property insurance and secure your business’s future? Contact Griffith & Harris Insurance Services today for a free consultation and discover how we can help you get the coverage you need.

Stay protected, stay prepared.

By choosing us, you’re not just getting an insurance policy; you’re gaining a partner dedicated to safeguarding your business.

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