What Building Insurance Do I Need for My Business?

Insuring your business property isn’t just about compliance—it’s also about peace of mind. Whether you’re a property owner safeguarding your investment or a tenant protecting your space and assets, building insurance prepares you for the unexpected. 

In this article, Anne Russo, director of small business underwriting at Central Insurance, simplifies the complexities of property insurance—from protecting your building to specialized coverage for fixtures and equipment.

Read on to learn about your liabilities, responsibilities, and coverage options. 

Building Ownership

Understanding your responsibilities is key to getting the right business insurance coverage, whether you’re a building owner or tenant.

“Building owners are typically responsible for insuring the structure,” Russo says. “However, some lease agreements require tenants to insure the building, especially if they occupy the entire space. In these instances, tenants are often responsible for risks tied to their operations, such as equipment maintenance or fire safety. It’s important tenants and landlords work together to clarify responsibilities for any leased space.”

Below, we break down typical building responsibilities between owners and tenants. 

Owners	Tenants
Building ownership also often means a higher level of responsibility since your main concerns are maintenance and safety. If you own the property, you’ll want to insure the structure against risks like fire, storms, or vandalism and include permanent fixtures, the roof, walls, plumbing, and HVAC systems.	Tenants are responsible for ensuring the contents of their space, including equipment, inventory, and furnishings. Insure any tenant improvements under a personal property business insurance policy.

Business Operations

Business operations directly influence insurance needs. Your business insurance policy should account for your unique operational risks. Here are a few examples from common industries, outlining how their insurance needs vary.  

Retail business insurance should cover property like inventory, fixtures,  and furniture. For example, property coverage can protect you if a fire causes smoke damage to your inventory.

Salons, spas, and repair shops often require coverage for specialized equipment and fixtures. Water damage can lead to costly repairs if a loss occurs after hours, such as a burst pipe due to freezing. Industrial or Manufacturing Operations

Manufacturers face unique risks, including equipment breakdown and potential hazards related to heavy machinery.

Restaurants, bakeries, and cafes need coverage for equipment like ovens, refrigerators, and mixers and protection against food spoilage or contamination.

Business Property

Taking stock of business property is another essential step in determining your coverage needs. The list below includes property insurance considerations for owners and tenants and examples spotlighting how their needs differ. 

Items like sinks, counters, and built-in shelving are often considered fixtures. If you own the building, these should be insured under your building coverage. These may fall under business personal property if you lease.

Owner Responsibility	Tenant Responsibility
A building owner installs a central HVAC system and built-in lighting throughout the property. These permanent fixtures are the owner’s responsibility. If a fire damages the HVAC system , the owner’s business insurance policy would cover the cost of repairs.	A salon owner leasing a space installs built-in styling stations and counters as part of their business setup. Although affixed to the property, they’re considered business personal property because the tenant installed them. The tenant must ensure these improvements to avoid out-of-pocket expenses if damaged or destroyed.

Whether you have industrial mixers in a bakery or diagnostic tools in an auto shop, you should include specialized equipment in your policy. Equipment breakdown coverage can be a valuable add-on for some businesses to protect against unexpected failures.

Owner Responsibility	Tenant Responsibility
A building owner installs a central HVAC system and built-in lighting throughout the property. These permanent fixtures are the owner’s responsibility. If a fire damages the HVAC system , the owner’s business insurance policy would cover the cost of repairs.	A bakery leasing their building brings commercial-grade mixers, ovens, and refrigerators. Tenant-owned equipment must be covered under the tenant’s business personal property policy. If a mixer breaks down unexpectedly, equipment breakdown coverage would help the tenant repair or replace it.

Don’t overlook desks, chairs, display cases, or other essential business furnishings. Business personal property insurance typically covers these items.

Owner Responsibility	Tenant Responsibility
The owner of a furnished office building provides tenants with desks, chairs, and filing cabinets. The owner must insure these items as part of the building’s property insurance to cover potential losses like theft or damage.	A tenant in the same office building brings their own ergonomic chairs, standing desks, and custom shelving units. These furnishings are considered the tenant’s personal property, and personal property business insurance is needed to protect against loss or damage.

Retailers, wholesalers, and manufacturers must also insure their inventory, including raw materials, finished goods, or merchandise for sale. If stock fluctuates throughout the year, coverage amounts should reflect peak inventory periods.

Owner Responsibility	Tenant Responsibility
Typically, building owners are not responsible for tenant inventory.	A clothing retailer stocks a leased storefront with seasonal apparel and is responsible for ensuring this inventory. If a pipe bursts and damages the clothing, the retailer’s business personal property insurance would cover the loss.

Essential Coverages for Small Businesses

Two key coverages form the backbone of most small business insurance package policies: building insurance and general liability. 

Building Insurance

Building insurance covers the physical structure and permanently attached fixtures. This is essential if you own the building or are responsible for insuring it under your lease agreement.

Learn More: What Commercial Building Insurance Do I Need for My Business?

General Liability Insurance

General liability protects against bodily injury or property damage claims occurring on your premises or due to your products or services. Even a single liability claim can be financially devastating for a small business. General liability coverage ensures you can continue operations without disruption.

Property insurance, whether building, business personal property, or both, plus general liability, are often bundled into a Business Owner’s Policy (BOP), simplifying small business insurance. A BOP is typically more affordable than purchasing separate policies, and it can be customized with additional coverages to address your business’s unique risks.

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The Central Difference

Determining appropriate building coverage can feel complex. Replacement costs often exceed what business owners expect, so working with an experienced insurance agent and carrier is key. 

“It’s important to talk about insurance to value, which ensures your building coverage reflects actual replacement costs,” Russo cautions. “Business owners may not realize what it would cost to rebuild after a total loss, especially if they haven’t recently updated their policy. Your agent or carrier are great resources for that.”

With competitive pricing, flexible coverage options, and exceptional customer service, Central’s BOP and commercial lines business insurance coverages offer a range of options to protect your building and business.

Contact an agent to learn more about how we can protect your livelihood.