Business Renters Insurance: A Guide For Business Owners

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 on their property.

Three Types of Business Renters 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.

1. Commercial property insurance – Commercial property insurance covers damage to commercial property and may cover damage to a loss of equipment and inventory.
2. General liability insurance – General liability insurance protects business owners from liability for accidents that occur on commercial property.
3. 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?

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, 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 disasters, 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 clause of loss forms, which outline the specific incidents 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 for medical costs, property damage, 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 toy shop, 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 worker’s compensation insurance (which covers medical treatment and lost wages for employees in the event of a work-related injury or illness) are not typically included in business renters insurance policies.

What is the difference between replacement cost and 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 similar features to the stolen model.

Actual cash value – Actual cash value insurance reimburses you by the value of the lost property, accounting for depreciation. If your five-year-old sewing machine is damaged by fire, your insurance company determines the current value of this machine and provides this amount as a payment. Depending on the kind of property your 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 rental studio.

To protect their properties and shield themselves from potential liability, some 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 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) must submit an application with details about your business.

Here’s a list of information you’ll want to have on hand.

1. Business name, address, and contact information
2. Business type and activities
3. Years in operation
4. Annual revenue
5. Approximate value of assets needing coverage
6. Any current insurance coverage information
7. History of prior insurance claims

Get a small business renters insurance quote

Hilton Head Insurance & Brokerage understands every business has unique needs. We’ll help you find what’s best for your business so we get you the right type of business renters insurance.

To learn more about business renters coverage, get a quote today.

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