How Much Does Commercial Property Insurance Cost? (2023 Rates)

Thang Truong
Thang Truong
Updated on:

The moment when you finally lease a new office space is richly rewarding and exciting. Your business is a credit to you and all of your hard work. In order to protect your business and your business space, you’ll want to look into commercial property insurance.  That way, if the worst should happen, your business will be protected. Below, we’ll talk about what commercial property insurance is, what it covers, how much it costs, and where you can find it. 

How much does commercial property insurance cost?

A small business owner might pay as little as $500 a year for commercial property insurance, whereas a major corporation will pay $500,000 or more. 

The average business owner pays between $1,000 and $3,000 annually for commercial property insurance.

What factors affect the commercial property insurance cost?

Commercial property rates vary due to things like:

  • Construction: How old is the building where your business is located? Does it have an updated fire alarm system? What year was the HVAC installed?
  • Occupancy: Who occupies your building during office hours? If your office is in a building with higher foot traffic, you’ll pay more because more people = more risks. 
  • Location: Where is your building located? Is it in a high-crime area? Is it in an area prone to flooding?
  • Protection: If the building has sprinkler systems or an updated alarm system, this can reduce your rates. 
  • Age of your equipment
  • Replacement value vs. actual cash value. Replacement value covers the cost of buying new equipment, but the policies are more expensive. 
  • Amount of insurance 

You can combine your commercial property insurance policy with a general liability policy. This is called a Business Owners Policy (BOP) and it may save you money over buying the policies separately.

How to find cheap commercial property insurance?

Below are a few practice tips to find cheap commercial property insurance or lower your current commercial property insurance cost:

Compare several quotes

Get quotes from a few companies and compare them to get the best coverage at the lowest cost. Different insurance companies will always give you different quotes and rates. If you decide on the first quote you receive, it is almost certain that you leave some money on the table. Getting several quotes from several companies can be time consuming, working with a broker like CoverWallet or Citizen General Insurance, or is a good way to get several quotes more easily.

Implement the best safety practices

Make sure that you and your employees follow all best safety practices required or advised by the relevant regulations and conduct regular monitoring and auditing of the essential systems in the building such as fire alarm, electricity fuse test, etc.

Ask for discounts

If they’re not offered to you when getting a quote, ask about them, whether you’re buying online or through an agent. Insurance companies always offer several discount programs. You may not be eligible for all programs. But even if you are not eligible now, you will know what it takes for be eligible for these discounts so that you can choose to implement the requirements to be qualified for the discounts in the next 3, 6, or 12 months.

Taking these steps will help ensure you’re not paying too much for your commercial property coverage.

What is commercial property insurance?  

Commercial property insurance protects your business from losses due to fire, theft, vandalism or natural disasters. It can help keep your business open in such events. They can also protect you against loss of income due to property damage. For example,  if you live in California and your business suffered a loss during the California wildfires, commercial property insurance should cover your business losses, property, and income.

>>MORE: Commercial Property Insurance: What It Covers & Who Needs It

What does commercial property insurance cover?

Although it varies from policy to policy, Commercial property insurance protects everything your business needs to run. It will pay to cover equipment that is lost, stolen, or damaged. Typically, that includes:

  • Your building: This can mean both the actual structure and the fixtures, machinery, and equipment.
  • Contents of the building: Everything else. This includes anything like laptops, office supplies, printers, etc. 
  • Other people’s property: Anything left in your care. 
  • Data breaches and hacks

There are three types of commercial insurance coverage.

  • Basic form policy: Covers natural disasters, fire, smoke, vandalism and theft. 
  • Broad form policy: Covers everything the basic policy covers, plus protection from falling objects, the weight of snow or ice, water damage, and collapsing structures
  • Special Form policy: If you need flood or earthquake insurance, you can include it here. 

What doesn’t commercial property insurance cover?

  • Floods
  • Earthquakes
  • Vehicles
  • Property that isn’t at your place of business. If you have a business where you have to move equipment around in order to do your job, such as a cleaning business, you’ll need Inland Marine insurance to cover your property while it’s at someone else’s property or in transit. 
  • Terrorist attacks
  • Theft by one of your employees. 

What should you consider when buying commercial property insurance?

You’ll first need to figure out how much commercial property insurance you need. You’ll want to look at the building that houses your business. Even if you only lease the space, you still want commercial property insurance if the space is vital to the running of your business. Otherwise, none of your assets will be insured. For example, say you rent a space for a small bakery in a downtown office building. The building goes up in flames.  The landlord has commercial property insurance, so he would be covered for the cost of the building. You, however, would suffer the loss of the space and everything in it without commercial property insurance. 

You’ll need to consider whether you want replacement value coverage or actual value coverage. Replacement value coverage pays to replace your item with a brand new item, but the cost of the insurance is higher. Actual value just replaces whatever the item is currently worth. 

You should consider adding flood or earthquake to your policy if your business is in an area that is prone to it. Keep in mind major flooding can happen even if you don’t live in a flood zone, such as during Hurricane Florence in 2018, flooding the Carolinas when they got 36  inches of rain. 

When you get commercial property insurance, be sure to keep an eye on your indemnity period. This is how much time you have to file a claim after a loss, beginning the date the loss occurred. 

Commercial property insurance may protect you in the case of a tenant lawsuit, if you are a property manager or otherwise rent space to others.

If you’re a small business owner, you will be happy that commercial liability insurance is tax deductible. 

Compare commercial property insurance quotes through digital brokers

Instead of going from website to website, you could go to a digital broker such as CoverWallet,,, or Citizen General insurance broker, etc. and enter your information once and then get quotes from several insurance companies. 

Coverhound took our information on our hypothetical bakery and gave us one quote, from Liberty Mutual for a Business Owners Policy (which includes commercial property) for $550 a year or $45.84 a month. This was with a zero deductible and $1,000,000 general liability limit. This is pretty interesting since Liberty Mutual doesn’t offer quotes online to their customers. However, they do offer it through digital brokers like Coverhound.

For example, CoverWallet asked us about our building, and also some other questions no one else had asked:

  • Do you have business operations and/or locations that are not included in this insurance application?
  • Has your business had any gaps in insurance coverage for the past three years?
  • Do you derive more than 20% of sales from catering?
  • Is your business open past 1:00 a.m.?
  • Do you have valet cars?
  • Has your business received notice of any violations or fines from any government agency in the last three years?

>>MORE: The 5 Best Commercial Property Insurance Companies

Below are a few FAQs about Commercial Property Insurance

1. Should I combine commercial property insurance with general liability insurance?

If you can, you should. This is called a Business Owners Policy and it offers the protection of both types of insurance at a rate lower than if you were to buy the policies separately. 

2. How can I reduce the costs of commercial property insurance?

Insurance companies like to see a building newer than fifty years. If your building is older than this, you can make sure the roof, the HVAC, plumbing and electrical systems have all been updated. Having fire safety equipment and a security system will also save you money. Some insurance companies will go over your business with you and make recommendations on how you can make your office space safer. 

3. Is commercial property insurance required by law?

No, but if you lease or rent a space from a landlord, the landlord may require you to have it. Read your lease carefully. 

4. What is business interruption insurance? And do I still need it in addition to commercial property insurance?

In the event some catastrophe happens and your business is forced to close temporarily, business interruption insurance will help reimburse you for lost income and get you back on your feet.

Commercial Property Insurance and Business Interruption Insurance are complimenting each other. For example, if your business is closed due to fire. Commercial Property Insurance will cover the damages of the building and other equipment caused by the fire whereas Business Interruption Insurance will cover the lost income during the period when your business is closed. That’s the reason why for small businesses of annual income of less than $1 million, commercial property insurance, general liability insurance, and business interruption insurance are combined into one single policy, called Business Owners Policy (BOP).

5. What is commercial landlord insurance?

If you make money by renting out apartments or properties to others, you’ll want commercial landlord insurance. This is a little different than commercial property insurance, as you need to protect your property from damage from the tenants, and you’ll also need to protect yourself against lawsuits from tenants who fall down the stairs or slip on an icy sidewalk.

If you have a mortgage on the apartments or properties that you rent out, the mortgage lenders might require you to have commercial landlord insurance. Property damages can easily cost hundreds of thousands, or even millions, of dollars. Without an insurance policy, you might lose your properties or even go bankrupt.

6. What is additional insured on a commercial property policy? How does it work?

An additional insured is a third party that has a liability exposure in a business relationship. For example, if you have a cleaning business in a commercial building, you could ask to be named as an additional insured on the owner of the building’s policy. That way if someone falls on the floor you just cleaned, you’ll be protected by the owner’s general liability policy or business owner’s policy. You should get your own general liability insurance, though, just in case. If you want to get the right business insurance policies for your cleaning business, consider our guide – The 5 Best Providers of Cleaning Business Insurance.

7. What is vacant commercial property insurance?

Vacant buildings are often targets of vandals and thieves. They can also sustain damage from fire and other natural disasters. A property is considered vacant if it’s less than 31% occupied for an extended period of time. This can happen because of renovations or repairs. Vacant commercial property insurance protects the owner of the building from losses due to fire, vandalism, flood, etc. 

Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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