When you’re running a business, you always have to be prepared for unexpected events or costs—and that’s why you have small business insurance. But what happens if you rent a property for your business, like an office space, warehouse, or storefront? Will your insurance cover damages or losses within this space or, do you need business renters insurance?
Overall, if you rent property for your business operations, you’ll want to get insurance that specifically covers this space and anything that is stored or happens within it. This being said, however, business renters insurance is a little different from many other types of traditional policies.
In this guide, therefore, we’ll explain exactly how business renters insurance works, who needs it, and how much it costs for small business owners. We’ll also explore some top insurance providers—so that you have all the information you need to adequately protect your business from the unexpected.
Business renters insurance provides coverage specifically to businesses that operate out of a rented office, warehouse, or other property. Typically, business renters insurance is a customized policy designed to fill in the gaps of traditional commercial insurance policies. Generally, the term business renters insurance can be used to refer to any insurance policy (or combination of policies) that protects a business from claims or damages related to a property they rent.
Unlike, say, general liability insurance, which is a defined and fairly standard type of policy, business renters insurance doesn’t work in the same way.
Instead of approaching an insurance company and looking at their “standard business renters insurance policy,” as you would with a general liability policy, or even a personal renters insurance policy, you would work with an agent to combine policies or create a customized policy that covers your needs as they relate to your rental property.
In this way, your business renters insurance will be almost entirely unique to your business, as it will depend on variables, like what you’re looking to cover, what type of property you’re renting, how you’re using the rental space, where the space is located, etc.
Keeping this definition in mind, any business that rents property for their operations—whether it’s an office, storefront, warehouse, etc.—should have business renters insurance. In fact, many landlords will now require that a business show proof of insurance in order to rent their space.
In this way, it’s important to review any small business lease agreement you receive, as a landlord will include what, if any, specific damages or claims on the property you would be held responsible for under your contract. Although the landlord will likely have insurance to cover the property, you’ll want to ensure you have your own commercial renters insurance to protect your business.
The business renters insurance coverage you need will be largely specific to your operations and the space you’re renting. On the whole, however, your business renters insurance policy should protect your business from claims and damages related to the property, ideally including:
Generally, a single, standard business insurance policy will not cover all of these different instances, and this is why business renters insurance is typically a customized policy or a combination of standard policies.
As an example, if you own a manufacturing business and are renting a warehouse to store your equipment and inventory, you’ll likely need a business renters insurance policy that focuses not only on protecting your business from damages made within the space, but also from damages or loss of the inventory and equipment you’re storing there—as losing these materials would be most costly to your business.
If you own a small consulting agency and rent an office space, on the other hand, you’ll likely want your business renters insurance coverage to focus on accidents and injuries within the space and damages to the property itself—as these types of claims will be most costly to your business.
Ultimately, although it’s likely that both of these businesses will need the same types of insurance within their business renters insurance policy—commercial property insurance, general liability insurance, etc.—the specific coverage and limits involved will be unique to each business.
At this point, you may be wondering how to get a business renters insurance policy that meets your coverage needs.
Generally, you’ll work with an insurance professional to build a policy with the coverage you need. Depending on the coverage you want from your business renters insurance, your policy could include any or all of the following types of insurance:
Generally, your business renters insurance policy should include both general liability and commercial property insurance. For additional coverage, however, you might decide to add on or customize your policy—for example, if you rent in an area that’s likely to flood or experiences frequent crime, you might add a specific flood or crime insurance policy.
All of this being said, perhaps the best way to get business renters insurance coverage is through a business owners policy (BOP). Typically, a BOP is a specialized type of insurance policy that combines general liability insurance, commercial property insurance, and business interruption insurance. In this way, by bundling your insurance into a BOP, you’ll only have to pay one premium, instead of three separate ones, and you can save on costs.
Although the business renters insurance coverage you need will be unique to your business, you should generally be able to find the protection you require for your rental property with a BOP. Plus, most insurance providers can accommodate specialized coverage within a BOP—making it a great option for customizing your business renters insurance policy to exactly what you need.
Now that we have a better sense of what commercial renters insurance is and how it works, let’s discuss an important aspect involved with this type (or any type) of policy—cost.
Ultimately, just like any type of business insurance policy, the cost of your business renters insurance coverage will depend on a variety of factors. First and foremost, your costs will vary based on your business’s size, years in operation, industry, number of employees, location, and more. Next, your costs will also depend on the type of coverage and amount of coverage you need with your policy.
If, for example, you want to ensure that any and all risks are covered by your business renters insurance policy, your costs will very likely be higher than if you simply bundle a liability insurance and commercial property policy. Additionally, if your business rents property in a high-risk area, you’ll likely find that your costs will be correspondingly high. This being said, however, if you bundle your coverage as a BOP, you’ll likely see lower costs than you would if you purchased three different policies separately.
Therefore, assuming that, at the very least, you’ll want your business renters insurance policy to include everything covered under a BOP, you can use the average cost of a BOP to get an idea of what your costs might look like.
According to insurance marketplace Insureon, on average, a BOP costs around $1,200 annually. Therefore, although your costs will depend on many of the factors we’ve discussed—as well as the insurance provider you work with—it’s reasonable to say the average cost of business renters insurance will fall in line with the average cost of a BOP.
With all of this in mind, another important consideration when it comes to the cost of business renters insurance is replacement cost vs. actual cash value. This principle relates specifically to commercial property coverage and how your policy will evaluate the cost of your property—and therefore, how much you’re paid for any claims you make.
If your policy uses the replacement cost method, your policy will cover the cost of restoring or repairing your property to the original state—including labor, materials, or actual property replacement. With the actual cash value method, on the other hand, your policy will pay to repair or restore damaged or lost property but will deduct some of the cost to account for depreciation—in other words, you’ll receive compensation for the actual cash value, or what the property is worth at this point in time, as opposed to when it was originally purchased.
As you might imagine then, replacement cost commercial property insurance affords more coverage—however, this coverage is also likely to be more expensive than actual cash value coverage. Nevertheless, if you have expensive equipment or inventory that you want to protect, paying more for replacement cost property insurance may be worthwhile.
This being said, when you’re looking for the right business renters insurance, you’ll want to keep this distinction in mind and how it may affect your costs and coverage related to protecting your property.
Luckily, if you need business renters insurance, most companies that offer commercial insurance should be able to work with you to get you the coverage you need. With this in mind, there are typically three different approaches you can take to find the right insurance policy for your business:
Ultimately, it will be up to you to decide which method is right for your business. This being said, however, if you want to explore different providers and what they have to offer, you might start with some of the top companies that provide business owner policies.
As we’ve discussed, getting a BOP as your business renters insurance coverage is perhaps the easiest and most affordable way to protect your business and rental property. Therefore, you might consider these business insurance companies as you search for commercial rental insurance:
The Hartford is a worthwhile provider for all different types of small business insurance including the coverage you would need for business renters insurance. With The Hartford, you can get a quote online or contact a local agent to discuss your insurance needs.
The Hartford is particularly well-known for their BOP, which not only includes general liability insurance and commercial property insurance, but also business income (or business interruption) insurance. This policy is designed to protect your business from fire, theft, lawsuits, and more—for spaces that you own or rent.
Plus, the BOP from The Hartford is completely customizable and you can easily add data breach insurance or professional liability insurance to expand your coverage.
You can get an initial small business insurance quote from The Hartford online. Image source: The Hartford.
If you’re a marketer, architect, IT professional, or any type of contractor, you might look for business renters insurance through Hiscox. Although Hiscox insurance is typically considered a go-to provider for these types of business owners, they can provide insurance for a variety of small businesses—including a highly customizable BOP.
Generally, a BOP from Hiscox combines general liability and property liability coverage—which, in particular, will protect your furniture and equipment at up to five different office locations (including accidental damage). Additionally, Hiscox gives you the option to customize your policy by adding office insurance for fire and business interruption, electronic data loss insurance, hired or non-owned vehicle liability insurance, commercial crime insurance, and terrorism coverage.
You can quickly and easily submit your information, receive a quote from Hiscox, and purchase a policy—all online. You also have the option to reach out to a Hiscox agent by phone to discuss your options in greater detail.
Finally, you might also consider Chubb insurance as a top choice for getting a BOP to cover your business renters insurance needs. Although Chubb is generally considered more expensive than some other providers, they’re also well-known for their coverage for businesses with international interests. With this in mind, like The Hartford and Hiscox, Chubb offers a highly customizable business owners policy, which first and foremost combines general liability and commercial property insurance.
As you can see in the photo below, however, Chubb also offers a significant number of enhancements that you can add to broaden your coverage to exactly what your business needs. In particular, Chubb offers property enhancements, earthquake coverage (in certain states), equipment breakdown, and even crime coverage.
This being said, unlike The Hartford and Hiscox, you’ll have to reach out to a Chubb agent to learn more about their BOP and what it might look like for your business.
This list shows the different options Chubb offers to enhance your coverage under their BOP. Image source: Chubb.
At the end of the day, it’s important to remember that business renters insurance can refer to any policy or combination of policies that protects your business in relation to the property you rent. In this way, it’s different from many other types of commercial insurance—and can certainly be confusing at first glance.
When it comes down to it, however, a business renters insurance policy (at the very least) should include general liability and commercial property insurance to protect your business from claims of bodily injury or damages that result from operations, theft, or disasters within your rental space. Therefore, if you’re looking for business renters insurance, you’ll likely want to start with a BOP, as these policies can be easily customized to your needs and can save you money on your business insurance.
This being said, if you’re unsure of what kind of coverage you need, especially as it relates to a lease agreement, the best thing you can do is consult an insurance agent or business attorney. These professionals will be able to answer questions you may have and help you find the right business renters insurance coverage for your needs.
Randa Kriss is a senior staff writer at Fundera.
At Fundera, Randa specializes in reviewing small business products, software, and services. Randa has written hundreds of reviews across a wide swath of business topics including ecommerce, merchant services, accounting, credit cards, bank accounts, loan products, and payroll and human resources solutions.