Why Do You Need Commercial Property Insurance?


Bryan Huynh

- Updated February 23, 2024

Why Do You Need Commercial Property Insurance?

Also known as "business property insurance," commercial property insurance is a type of business insurance that covers your company's physical assets from unexpected and damaging events. Covered physical assets can include your company's actual location, office equipment, inventory, furniture, and any other items that support your company's regular operations. Damaging events can include fires, wind, lightning, theft, and vandalism. However it does not cover company vehicles which would fall under commercial auto insurance.

Your risk remains the same even if you do not foresee any damage occurring to your company's property. One incident could irreparably harm your company's fortunes if you do not own adequate coverage.

This article looks into why you need commercial property insurance and why you might not. You can protect your company from ruin with what you have learned.


Why do you need commercial property insurance?

To protect against financial loss

Insurance can help you protect your company's assets. Imagine working diligently to get your company off the ground. You have finally turned a corner and are running a profitable business. Then the unexpected happens. A wildfire runs right through your office, destroying computers and other equipment that you purchased for business use. If you do not have sufficient insurance, you have no choice but to take the loss. Can your company sustain such a burden?

If you have proper insurance, then most if not all of what you lost in the fire can be covered and replaced with minimal damage to your coffers. Commercial property insurance can help you cover replacement and repair costs that would add expenses your company might not be able to handle.

To protect against liability

Companies must be concerned with reducing their liability risks. From creating and following safety procedures to insurance, there are many ways companies can reduce their risks. Commercial property insurance can prove essential if your company's property is damaged or destroyed and your company is found to be at fault. In this instance, your company could be held liable for damages. Replacement and repair costs would have to come out of your company's reserves, possibly straining an already precarious situation. Commercial property insurance could soften the blow, covering the costs associated with a liability claim as well as the property loss.

To meet contract requirements

For many companies, contracts are simply a normal part of doing business. They can help companies operate smoothly and offer certain legal protections. Contracts can also minimize risk, making them crucial in specific circumstances.

Some contracts require participants to possess commercial property insurance. More than a condition of doing business, owning commercial property insurance can be seen as a responsible gesture. This can instill good faith that the party is serious about their business relationships and wants to complete their contracts with few hassles. Having commercial property insurance is a win-win proposition concerning contractual obligations.

To protect against unexpected events

Your company can have the strictest risk management policies with absolute adherence. However, all it takes is one disaster or unexpected event to wreak havoc on the best laid plans. Can your company withstand a fire or burglary? What if the event destroys your place of business? What if your inventory perishes? How can you pick your company back up and get it on firm footing?

Commercial property insurance can give you and your employees the peace of mind that even in the direst of situations, business can continue as usual. Being prepared for possible adverse events is vital. However, sometimes the events you overlook are the ones that do the most harm. You can try to protect your company against every risk, but you also have a business to run. Commercial property insurance can step in as an additional layer of protection. You can run your business easier knowing that it is protected against unexpected events. Your employees do not have to worry about what they will do if an event disrupts your company's normal operations. This type of insurance can help them deal with any crisis that goes their way.


What are examples of commercial property insurance claims?

Natural disasters

No one can stop a natural disaster from happening. All we can do is protect our assets and ourselves from harm as best we can. Preparation can go a long way in securing lives and property. It might sound frightening, but natural disasters do not have to devastate your company's property. Commercial property insurance can help protect your company even if it operates in flood or earthquake-prone areas.

Flood or earthquake coverage can be added to many commercial property insurance policies. If you believe your company is at risk of damage from these or any other natural disasters, then you should contact an insurance provider to discuss what type of coverage could best protect your company.


An increasingly worrying type of disaster, fires can lay waste to property in moments. No amount of preparation can save a company's physical assets during the worst fire event. Floods can ruin equipment and inventory. Earthquakes could damage structures. However, those two natural disasters offer some hope. Perhaps the water or earthquake damage is not as bad as previously thought. Fires burn away hope. Their effects are typically final and absolute. They can spark death and destruction in mere moments. Their rise in frequency and intensity has proven to be absolutely worrisome.

The best fire preparedness plan will probably not stop the damaging effects once a fire sweeps over your company's property. You could be lucky and sustain minimal damage. Do you want to play the odds and skip owning commercial property insurance? You could find yourself on the losing end of a fire if your company is not properly protected against losses sustained during a blaze.


Theft is a personal crime. A person commits theft. They must enter your premises, choose what they want, and steal it. A fire or other natural disaster is impersonal and furious. Theft has a personal touch and purely human intention. These facts do not make losing company property to thieves any easier to manage.

Theft might sting more if your company has policies and procedures in place designed to reduce property loss. Commercial property insurance can ease the pain. If you own commercial property insurance and any of your company's property is stolen, you can file a claim to cover the cost of replacing the stolen items.


Another personal crime, vandalism is the deliberate destruction of property. People intending to make a statement, fulfill a grudge, or for no reason at all can seek out your company's property and damage it. They can spraypaint the side of your office building. They can break into your store and tear apart inventory. They can destroy in seconds what might have taken you years and a fortune to collect.

Commercial property insurance can come into play if your company falls victim to a vandal. If your company's property is vandalized, then you can file a claim to recoup repair expenses. If you do not have commercial property insurance and are a victim of vandalism, then you would probably be on the hook for any expenses. Many people overlook the fact that vandalism can drain a company's finances. Fortunately, insurance exists to prevent monumental losses stemming from malicious harm.

Equipment breakdown

Although policies may vary, commercial property insurance might cover your equipment's repair costs if anything breaks down. You should read your policy to find out for certain or contact your insurance issuer.

What if you routinely maintain your company's equipment? Can you still encounter breakdowns?

Equipment that is regularly used during the course of business can quit functioning for any reason at any time. There really is no foolproof plan that keeps equipment operating indefinitely. Things break.

If your company owns commercial property insurance and equipment stops working, you can file a claim to help pay for repairs. If your company does not have such a policy, then you will have to pay for repairs if you want to restore the equipment. Can your company afford such a bill? If not, then can your company afford not to have that piece of equipment up and running? How will business suffer without it?

Commercial property insurance can help you avoid answering these questions. You can run your company confidently knowing that your coverage can kick in if any of your equipment ceases to work.


When do you not need commercial property insurance?

Figuring out how commercial property insurance can save your company from ruin after a disastrous event can bring you closer to picking the right policy that covers your company’s risks. However, you might not need commercial property insurance. Not every company does.

Your company might not benefit from commercial property insurance if it:

  • is a sole proprietorship or partnership and has no physical premises or equipment.
  • is a corporation or limited liability company (LLC) and has no physical premises or equipment.
  • operates completely online and does not have any physical premises or equipment.

Why would your company need commercial property insurance if it has no real property to speak of? Why should you pay for coverage that does not apply to your company?

Knowing what type of insurance best meets your company's goals, budget, and situation can help you purchase the right coverage. You can save money when you buy insurance that pertains to your company. For instance, if your company does not make, sell, or distribute any products, then you probably would not need to possess product liability insurance. If your company does not involve the use of vehicles for business use, then you probably would not need commercial auto insurance.

What if you pay for these policies when you do not need them?

You could be wasting your money.

Not needing commercial property insurance does not mean you do not need any business insurance. A Business Owner's Policy (BOP) can include the essential coverage to protect your company. A BOP can also contain reduced rates since multiple policies are bundled. Many insurance providers offer BOPs. You can inquire with any number of them to explore your options.

If you ever need assistance with your business insurance, you can turn to online resources or go straight to an insurance agent or broker. Talking things over with an expert can help you determine what insurance you really need.



Not having sufficient business insurance can be a costly mistake. You might save money in the short term but you could be placing your company at risk of expensive claims, litigation, and losses. Rejecting the right type of coverage could force you to front replacement and repair costs should your company experience a sudden catastrophe. Endangering your company’s finances just to save money is not the smartest business practice. You have no reason to not protect your company with commercial property insurance if such coverage is applicable. Investing in the right coverage today equals investing in your company’s future.

About The Author

Bryan Huynh

Bryan Huynh

Product Tester & Writer

Bryan Huynh is a dedicated Product Tester & Writer. Just as insurance has your back, Bryan works to review and inform you about the wide range of insurance products available, ranging from business, auto, health, home, pet, to life insurance.

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