Commercial property insurance
Where the limit is set matters more than it looks.
Commercial property covers what the business owns: the building where you own it, and the contents, stock, tools and equipment either way.
A tenant business still needs it. The landlord's policy covers the building and nothing belonging to the tenant, on exactly the same logic as a residential lease.
What is insured
The building itself where you own it, and separately the business personal property inside it — furniture, fixtures, machinery, tools, stock and inventory.
Improvements you have made to a leased space are usually your property to insure rather than the landlord's, which is one of the more commonly missed items on a tenant's policy.
Property away from the premises — in transit, at a job site, in a vehicle — is frequently limited or excluded, and is covered properly by separate arrangements such as inland marine or tools cover.
Named perils and open perils
A named perils form covers the causes it lists and nothing else. An open perils form covers any cause except those it excludes, which is broader and generally the better basis where it is available.
The practical difference shows up in unusual losses. Under a named perils form, a cause nobody thought to list is simply not covered.
Flood and earthquake are excluded on standard forms either way and are arranged separately.
Coinsurance, which has no residential equivalent
Commercial property commonly carries a coinsurance condition, and it surprises people because nothing on a home policy behaves like it.
In outline: if the limit is set below a stated proportion of the property's value, a claim can be reduced proportionally — including a partial claim well within the limit.
So under-insuring to save premium does not simply cap the worst case; it can reduce an ordinary claim. This is the single most important reason to set the limit deliberately rather than carrying a figure forward from an earlier renewal.
How it is valued
Replacement cost pays what it costs to replace the item today; actual cash value pays that less depreciation. On ageing machinery and fit-out the difference is substantial.
Some policies use agreed value, which removes the coinsurance condition in exchange for agreeing the property's value in advance — generally the cleanest arrangement where it is available.
The basis can differ between the building and the contents, exactly as on a home policy, and it is stated on the declarations rather than implied by the premium.
Setting the limit
The limit should reflect what it would cost to replace the property today, not what it cost to buy or what it is worth in the accounts.
Book value is the wrong anchor — depreciated equipment still has to be replaced at current prices, and construction and equipment costs have moved quickly.
Review it annually. Businesses acquire equipment and stock continuously, and coinsurance means a limit that has fallen behind affects ordinary claims rather than only catastrophic ones.
Common questions
No. It covers the building and the landlord's liability. Your contents, stock, equipment and usually your own improvements to the space are yours to insure.
A condition that can reduce a claim proportionally if the limit was set below a stated proportion of the property's value — including on a partial claim that sits well within the limit.
Often only to a limited amount, or not at all. Property in transit, at job sites or in vehicles is usually covered by a separate arrangement rather than by the standard property section.
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This page is general information, not advice about your specific circumstances. A licensed insurance professional can tell you what’s actually available to you.
General information only, not insurance advice. Coverage, availability, and terms vary by insurer and by state, and are subject to underwriting. Quote My Policy LLC is a licensed insurance producer. Nothing here binds coverage.