Commercial Property Insurance in Texas

In Texas, commercial property insurance is one of the core business owners' policies. Commercial property insurance protects your company's physical assets from perils like fire, windstorms, explosions, theft, vandalism, and other events covered under the policy. These physical assets may include the business property owned, leased, or rented, including office equipment, furniture, fixtures, inventory, and other items used for the business operation's day-to-day running.

Commercial property insurance is recommended to protect your business from small to extreme financial loss and pay out of pocket to repair or replace your damaged business property. Even for home-based “small” business owners, it is essential to subscribe to commercial property insurance because it provides more coverage than homeowners insurance offers.

What is Considered Commercial Property Insurance?

Texas commercial property insurance policy shields you against the financial fallout from damages or loss of your business property. It is a type of insurance policy that you can tailor to meet your specific needs. The coverage is broad enough to cover almost all kinds of physical loss, with some specific policy exclusions.

Commercial property insurance is regulated by the Texas Department of Insurance (TDI) per the provisions of the Texas Insurance Code. It is not required by any law in Texas. Nonetheless, protecting a business against perils that may affect valuable business assets is recommended.

If you are operating your business in a rented property, your landlord may require you to have a commercial property insurance policy. If your business and the equipment are being financed, you are required to insure them.

Commercial property insurance policies provide either replacement cost coverage or actual cash value coverage:

• Replacement value (RCV): This is the cost to replace or repair a business asset. For instance, the policy will pay for the new construction of the business building after a covered loss.

• Actual cash value (ACV): Actual cash value is the market value of the business assets at the time of the loss. This is usually the replacement value minus depreciation.

The value a business chooses should be influenced by the business' estimated ability to rebuild in the case of an unexpected event and how much risk the business is willing to take. Choosing ACV means a lower premium; however, you need to pay out of pocket to cover what is left after the claim payout. Meanwhile, RCV requires a higher premium and lower chances of paying out of pocket in the event of a disaster.

Depending on your budget for a commercial property insurance policy, you can combine both the replacement value and the actual cash value or subscribe to the most suitable one to your insurance needs. To be fully protected, it is recommended that your business property policy provides replacement cost coverage. Make sure to discuss your business insurance needs with a knowledgeable and experienced state-licensed insurance agent, who can assess your needs and recommend the most optimal and cost effective solutions from multiple insurers.

What is the Purpose of Commercial Property Insurance?

The primary purpose of commercial property insurance is to protect a business's real and personal property. It pays for the repairs or replacement of an insured damaged, lost, or stolen property in the case of a covered event.

Natural disasters, for instance, can take many forms, and the cost of rebuilding can usually take a toll on the finances of a business. When a business experiences a catastrophic event, it may cause disruption to the normal business flow due to damages of assets or the building itself. As such, some businesses may find it difficult to recover from such loss. This is why you should plan for such emergencies to put the business in a better position to recover and resume normal operation as quickly as possible. With a commercial property insurance policy, the business owner(s) know that their total out-of-pocket risk for the repairs or replacements is limited to the cost of the premiums and the chosen deductible. .

What is Commercial Property Insurance for?

A Texas commercial property insurance policy is used to mitigate the effect of financial fallout resulting from the damage or loss of your business property and a claim against your business. In 2020, local fire departments responded to an estimated 1.4 million fire incidents in the United States. More than one-third of the fire incidents (490,500/35%) occurred in structures with non-residential structures like offices and industries, accounting for 8%. When a business experiences loss, their commercial property insurance will cover the business damages financial cost. Note that what will be covered is dependent on how extensive the coverage of the policy is.

What are the Types of Commercial Property Insurance?

There are three different types of commercial property coverage in Texas and each covers varying events. These include:

• Basic form policies provide the least coverage, covering common perils like damage caused by fire, windstorms, hail, lightning, explosions, smoke, and vandalism.

• Broad form policies provide basic form coverage plus additional perils like leaking appliances, structural collapses, falling objects, and the weight of ice, sleet, or snow.

• Special form policies cover all types of losses except those specifically excluded under the policy. Common exclusions in commercial property insurance include floods, earth movement, war, nuclear disaster, wear and tear, and insects or vermin.

In addition to the options mentioned above, you should consider these other types of coverages for your business property. These include:

Commercial auto insurance - is a type of insurance policy that covers physical damage and liability protection for commercial vehicles like company cars, trucks, and vans used for the regular running of your business. Since commercial property insurance will not cover damages to your commercial vehicle, it is recommended that you purchase a commercial auto insurance policy.

Commercial crime insurance covers both employee and third-party crimes like robbery, safe burglary, forgery, alteration, employee theft, money, and securities. Commercial crime insurance also covers social engineering fraud like fraudulent impersonation or business email compromise. That is, it insures a business against financial liability incurred due to the business being manipulated into transferring funds belonging to the business or clients.

Inland marine insurance - is a type of insurance policy that helps cover the transportation of products, materials, and equipment on land by truck or train. It protects movable business property, so you may want to consider inland marine insurance if you own a shipping or transport company.

Flood insurance & Windstorm coverage on the gulf coast - commercial property policies usually exclude flood from its coverage. Also, commercial property insurance will not cover wind and hail damages for businesses located on the Texas coast. As such, to be protected against damages that may be caused by flood, wind, and hail, it is best to purchase a separate policy. A business looking to buy a flood policy can buy from insurance providers in Texas or the National Flood Insurance Program. Meanwhile, coastal businesses can purchase from local insurance agents for wind and hail coverage through the Texas Windstorm Insurance Association (TWIA) or from local insurance agents.

Most insurance companies offering commercial property insurance also offer coverages that can be added to your existing policy. For instance, you can purchase business interruption coverage and commercial liability insurance at an extra cost. Business interruption coverage pays for the lost income due to the business not operating normally due to damages or destruction caused by a covered loss. Meanwhile, commercial liability insurance will provide coverage for claims of injury, illness, and property damage against the business, like paying for the legal fees,

Make sure to read the fine print of your policy well and understand every term stated. Doing this helps you make an informed decision on purchasing additional or more specialized insurance coverages such as flood, windstorm, or crime coverage to protect your business fully. You should speak to a state-licensed insurance agent when planning to buy a commercial property insurance policy that fits your business needs.

Do you Need Commercial Property Insurance in Texas??

Although purchasing commercial property insurance is not mandatory, it is recommended that every business owner who owns or rents a building for their business operation buy the policy. Also, if you have valuable assets that are essential to the revenue stream of the business, then you may want to consider purchasing commercial property insurance.

Whether you need commercial property insurance depends on your business insurance needs. You may end up getting just a basic commercial property insurance policy, while you may decide to add additional coverages for better coverage. You can consult with a state-licensed insurance agent to help you when you choose to get commercial property insurance.

Why Do we Need Commercial Property Insurance in Texas?

Commercial property insurance is needed because it protects against losses caused by unforeseen events like theft, property damage, liability, or any business interruptions that are not planned. Due to the protection commercial property insurance affords, many businesses spend on insurance premiums to ensure constant protection to their businesses in Texas.

According to data published by the Insurance Information Institute (III), one of Texas's most subscribed insurance policies is commercial insurance, with about over $29 billion written in premiums for the year 2020. Commercial insurance includes different coverages designed to protect businesses. In 2020, commercial multiple peril insurances had the largest commercial premium line with over $3 billion, which made up over 5% of all property and casualty insurance in Texas (commercial and personal combined).

We need commercial property insurance because it is important to a business to protect against any financial consequences caused by a loss that can wipe out the business assets.

Why Do you Need Commercial Property Insurance?

Regardless of the kind of business you run, whether a small retail shop or a big enterprise, you should consider purchasing a commercial property insurance policy to protect your business’s valuable assets. This is because not having it can be perilous, considering how much it may cost you to pay for repairs or rebuild costs. Most landlords or lessors may require commercial property insurance in place before you can occupy their building. Nonetheless, if any of the following applies to your business in Texas, you should consider getting commercial property insurance:

• You own an office space

• You lease or rent office equipment

• You are a manufacturer

• You maintain an inventory

• You own valuable physical business assets.

Home-based businesses may also need commercial property insurance if they have valuable business assets because their homeowner’s insurance policy has certain exclusions that will not protect their business. If your business owns or leases vehicles, they need to be insured using Commercial auto insurance.

How Much Commercial Property Insurance Do you Need?

How much commercial property insurance coverage you need in Texas depends on the specific needs of the business. Nonetheless, one important factor you can use to determine how much commercial property insurance you need is to know the value of the property you wish to insure. This is why you should keep the receipts of all items purchased for your business operations. If business property is being financed, the financial institution will require that you cover all of it with enough insurance to pay off your debt, in case of a loss.

When it comes to the physical structure, which is different from buying equipment, how much commercial property insurance you need may depend on the cost value you choose. Consequently, to get the worth of your premium, you need to insure a property structure for its replacement cost value. That is how much it would cost to rebuild the structure, including the material cost, professionals to be hired for the job, and labor intensity.

When you plan to purchase commercial property insurance, it is advisable to shop around for multiple quotes. Consult with a state-licensed insurance agent to advise you better on how much you need to purchase based on your budget, valuation of assets, and market trend. The rule of thumb is to get a quote from at least three insurance providers before settling for the insurer most suitable for your business coverage needs and budget.

Is Commercial Property Insurance Required by Law in Texas?

Commercial property insurance is not legally required in Texas. However, a landlord renting out a property or a lessor under a lease agreement may require a business owner to purchase commercial property liability insurance before signing the tenancy or lease agreement.

Note: Some business property, such as vehicles which are owned or leased by the business, must at least maintain liability coverage required by the state of Texas.

How Does Commercial Property Insurance Work in Texas?

Commercial property insurance covers your business's real estate and its valuable assets. With this coverage, you can quickly pay for the repairs or replacement of lost, damaged, or destroyed properties.

You may customize your commercial property insurance coverage according to your insurance-specific needs. However, you need to know what can be covered and not under the policy. So what does commercial property insurance cover, and what does it exclude?

What Does Commercial Property Insurance Cover?

Commercial property insurance covers business assets, including the building structure, equipment, fencing, landscaping items, and other specific coverages as chosen by business owners. Coverage is subject to deductibles.

What is Commercial Property Insurance Good for?

Commercial property insurance is good for a business owner that wants to minimize the financial impact the damage caused by a covered event may have on the business. For instance, if a fire in your office causes damage to valuable equipment needed for the business's day-to-day running, commercial property insurance will help pay for the relevant repairs or replacement.

When you are the lessee of a business property, you are usually required to purchase commercial liability insurance, so if you damage the building, your liability insurance pays first, before the landlord’s commercial property insurance picks up what’s left.

What Does Commercial Property Insurance Typically Include?

Commercial property insurance coverage is based on types, and some of the perils covered by the policy include:

• Basic form policy provides coverage for the following:

  • Natural disasters

  • Fires and smoke

  • Vandalism and theft

  • Sprinkler leakage

  • Riots and civil commotion

  • Sinkholes and volcanoes

• Broad form policy covers everything under a basic form policy as well as the following:

  • Falling objects

  • Weight of snow or ice

  • Water damage

  • Collapsing structures.

• Special form policy covers everything under the policy that is not under the exclusion clause. Special form is the most inclusive of all the coverages as it includes both coverages under basic and broad, unless they are expressly excluded from the policy. .

Examples of “other” types of commercial property coverages.

• Commercial auto insurance covers the vehicles owned or leased by the business:

  • Regular traffic - light vehicles that may be owned and driven as a daily driver by the management of the company

  • Commercial traffic - commercial transportation, such as semis.

• Commercial aviation insurance protects the company owned/leased aircrafts, which may be used internally within the company, or as commercial transportation by an airline.

Who is Covered by Commercial Property Insurance?

The business itself is listed on the policy as the insured, but ultimately, commercial property insurance covers the interests of the business, its owners, and its shareholders. In essence, anyone who depends on the success of this business benefits from the insurance coverage, including its employees. If a damage or loss occurs, the insurance is used to return the business back to its normal “pre-event” operation with the least effect on all involved.

What Types of Items Does Commercial Property Insurance Cover?

Some of the items that you can typically add to your commercial property insurance policy coverage in Texas include the following:

• The building used for the business, whether owned, leased, or rented. For example, if an unexpected fire guts your office or a hurricane lifts the roof, your commercial property insurance will help pay for the office's renovation after the fire or hurricane.

• The furniture and fixtures inside the office building. For example, someone breaks into your office and vandalizes your desks, chairs, and appliances. Your commercial property insurance policy can pay for the repairs or replacement of such items.

• Business supplies or equipment damaged, lost, stolen. For example, if a thief steals your computer and electronics, your commercial property insurance can cover replacement costs.

• Inventory. For example, if there is a power outage, after which a significant portion of your restaurant inventory spoils, commercial property insurance can help pay for the replacement of destroyed inventory.

Does Commercial Property Insurance Cover:

Does Commercial Property Insurance Cover Theft?

Yes, commercial property insurance in Texas covers the theft of your office equipment, inventory, furniture, and fixtures found in an irreparable state. Commercial property insurance policy covers the replacement at either the replacement value or the actual value. Note that how your insurance provider pays out the claim depends on the value you subscribed to in the policy. Speak to a state-licensed property & casualty (P&C) insurance agent if you need further information regarding commercial property insurance and other insurance coverages.

Does Commercial Property Insurance Cover Flood Damage?

No, commercial property insurance does not cover floods or flooding caused by hurricanes, tornadoes, and other natural disasters.

Even though flooding is a natural disaster, it is not usually covered under commercial property insurance. Flood insurance is, however, available as a separate policy; if you wish to protect your business against flood, you can purchase flood insurance from relevant insurance providers in Texas or through the National Flood Insurance Program. Speak to a state-licensed insurance agent for more information relating to flood insurance.

Does Commercial Property Insurance Cover Water Damage?

It depends on what causes the water damage. If unexpected burst pipes cause water damage, then commercial property insurance will cover the cost of repairs or replacement. However, commercial property insurance will not cover water damage caused by burst pipes due to negligence or normal wear and tear of the pipe. Also, the policy will not cover water damage caused by flooding.

Does Commercial Property Insurance Cover Riots?

Yes, commercial property insurance covers damages caused by rioting and the damages caused by the reaction of civil authorities due to the riot. However, if you want this specific coverage, make sure that it is included in your chosen policy.

Does Commercial Property Insurance Cover Earthquake Damage?

No, commercial property insurance does not cover damages caused by an earthquake. If you own an office, industrial building, or warehouse in an earthquake-prone part of Texas, you should consider purchasing earthquake insurance coverage as an optional add-on (rider). That way, you remain protected in the event of such a disaster. Speak with a Texas-licensed insurance agent for more information relating to earthquake insurance.

Does Commercial Property Insurance Cover Roof Leaks?

It depends on if the policy covers the peril which caused the roof leaks. If the roof leak is caused by a covered peril like wind, rain, hail, or fire, your commercial property insurance policy will cover the leak. Also, if the leak is caused by lingering wear and tear, or improper maintenance of the roof, commercial property insurance will not cover it.

Does Commercial Property Insurance Cover Arson?

No, commercial property insurance policies typically exclude fire damage caused by arson. Arson is a malicious act of setting properties like building housing a business on fire. It is considered a crime, unlike fire caused by natural causes. This means if your building structure and your business's valuable assets are damaged due to arson, you will not be entitled to any claim under the policy.

Most insurance companies may want to rely on arson as an excuse not to pay your claim, especially if the fire department cannot locate the source of the fire. As such, to prevent your claim from being denied, you should work closely with the fire investigators in the event of arson. This is to prevent your insurance provider from capitalizing on arson not to pay your insurance claim in the event of a fire incident. Always discuss your commercial insurance claims with your trusted commercial insurance agent prior to filing the claims.

Does Commercial Property Insurance Cover Tree Removal?

This depends on what fell the tree into the business structure or business premises. For instance, if the tree fell due to a covered peril under the policy and caused damage to your property, the policy can cover the cost of removal of the tree. The policy may also cover the cost of repairs for havoc caused to the structure or any other valuable business assets.

Review your commercial property insurance coverage at least annually, to make sure your policy provides sufficient coverage for your current business needs. If you are having trouble determining who covers the removal of trees and other debris after a covered event, consult with your insurer or ask a state-licensed insurance agent for professional help.

What is not Covered by Commercial Property Insurance?

Traditional Texas commercial property insurance only covers the business structure (building), equipment, inventories, and pieces of furniture and fixtures. It does not cover the following:

• Goods in transit will not be covered. You will need to purchase a Texas inland marine insurance policy to cover your business property or equipment in transit.

• Damaged property belonging to your client or customer caused by your negligence or that of your worker. For that you need to purchase a commercial liability insurance policy.

• Vehicles owned or leased by the business. All commercially-owned and registered vehicles are covered by commercial auto insurance.

• Costs incurred when your business closes temporarily due to a disaster. You can purchase Texas business interruption insurance which will pay for lost revenue, day-to-day expenses, and the cost incurred for operating in a temporary location.

• Replacement of malfunctioning equipment after experiencing a mechanical or electrical failure at your office. You can, however, add Texas equipment breakdown coverage as an endorsement on your commercial property insurance policy.

What Does Commercial Property Insurance Typically Exclude?

Commercial property insurance has certain coverage exclusions in Texas, which includes:

• War: damages caused by war, terror attacks, and damage from missiles or another machine or act of war are generally excluded.

• Flood and earthquake damage: If your business is situated in a flood zone, your commercial property insurance policy cannot cover it. It is advisable to buy separate policies to take care of this peril.

• Smoke damage from a negligent act is excluded under the commercial property insurance policies.

• Equipment breakdown.

If you wish to protect your business fully, you can add the excluded perils as endorsements to your commercial property insurance. You can contact your existing insurance provider to add these exclusions to your primary policy (commercial property insurance). If you plan to purchase commercial property insurance, you should consult with a state-licensed insurance agent to help you shop around for coverages suitable for your insurance needs.

NOTE: As a general rule, for all insurance, read the exclusions section first.

What is an Example of Commercial Property Insurance?

If a fire caused by lightning burns down your warehouse, which houses your supplies, equipment, furniture and inventory, your commercial property insurance can cover the cost of replacing them. Also, if the building structure is affected by the fire, the policy will provide coverage for repairs or rebuilding costs.

Similarly, if thieves vandalize your store, your commercial property insurance will provide coverage. However, how your insurance provider will pay out the claim depends on the value you choose for your policy. Under a replacement value, if your inventory sums up to $5,000 and it is vandalized, your insurance provider will pay you the full cost. Meanwhile, if you have actual value, your insurance provider will pay you the market value of the items at the time of the accident. Ultimately, whether you want 100% coverage or are willing to pay out of pocket to make up for the coverage depends on you.

What is the Most Common Use of Commercial Property Insurance?

When you are thinking about purchasing insurance for your business in Texas, you may have many questions and concerns regarding its uses. Commercial property insurance typically protects your business against asset loss and property loss, including the structure housing your business.

Commercial property insurance is used to protect business property and equipment from covered perils like fire, explosions, burst pipes, storms, theft, and vandalism. It provides funds for replacing or repairing any damaged covered items by either paying the replacement value or the actual value of such items to put your business back to normal. Direct your questions to a state-licensed commercial insurance professional, who can help you assess your business needs and find the most optimal coverage among the available options.

What is the Difference Between Commercial Property Insurance and Commercial Liability Insurance?

Commercial property and commercial liability insurance are coverages under a business owner policy in Texas. They both protect a business from claims resulting from liability from bodily injury and property damage.

Commercial property insurance covers the items in the business, while liability insurance covers the actions. That is:

• Commercial property insurance safeguards assets of a business from perils like fire, damage, and theft.

• Commercial liability insurance protects the business from lawsuits arising from personal injury, damage to property, and professional mistakes - which are the fault of your business.

Whether you purchase commercial property insurance or commercial general liability insurance, the vital thing is protecting your business and preparing for unforeseen events. Most Texas businesses carry both property and liability coverage.

What is the Difference Between Commercial Property Insurance and Homeowners Insurance?

Although both coverages protect properties, they differ for certain reasons. Commercial property insurance is designed to cover events that may affect business operations; this is why insureds can easily customize their coverage to include specific valuable business assets. Also, commercial property may cover lost income the business may experience in the event of a covered peril.

Homeowners insurance is more standardized when compared to commercial property. It protects only the home and personal belongings. Homeowners insurance policies usually contain exclusions that may cover commercial items. It is essential to get standard commercial property insurance because homeowners insurance may not be sufficient to cover all their commercial assets.

Who Can Get Commercial Property Insurance in Texas?

Any business owner in Texas can get commercial property insurance to protect their business. This includes corporations, small businesses, home-based businesses, and other small enterprises. Anyone with a business with so much to lose if there were to be an unexpected event should purchase commercial property insurance.

Who Qualifies for Commercial Property Insurance?

Any business duly registered in Texas and under any relevant law of the business’s location qualifies for commercial property insurance. Every business in the state must register with the Texas Secretary of State (SOS) to be a legitimate business capable of being insured. Before you purchase commercial property insurance for your business, speak with a state-licensed insurance agent to see how much coverage can be customized for your protection.

Who Needs Commercial Property Insurance?

The following individuals need commercial property insurance in Texas to protect their businesses.

• Business owners who own the premises being used to run their business. Apart from commercial property insurance, these individuals can get additional coverage like commercial liability insurance for more comprehensive coverage.

• Business Renters or leaseholders - most Texas landlords or lease agreements require you to purchase commercial property insurance to protect them and their building in the event of a disaster (also known as Renter liability coverage).

Who Should Get Commercial Property Insurance?

If you wish to protect your business investment against unexpected events, then you should consider purchasing commercial property insurance.

You should get Commercial Property Insurance if:

• You run a business in a commercial space owned by you.

• You run a home-based business.

• You rent your business office space and premises.

• You have valuable business assets, the loss of which would cause you financial hardship if you were to pay out of pocket after unforeseen circumstances.

If you have an active business or if you are just thinking about opening one up, make sure to discuss your business insurance needs with a knowledgeable and experienced state-licensed insurance agent, who can help you go over the possible options.

What are the Benefits of Commercial Property Insurance?

A business benefits from purchasing a commercial property insurance policy as it helps them pay for repairs or replacement of business assets after a covered loss. However, this policy also has some downsides.

PROs and CONs of Commercial Property Insurance in Texas

PROs of Commercial Property Insurance

• It protects the business from financial losses by paying for the repairs and replacing business assets. Besides covering the deductible, the insured business does not risk any more of its capital, which without insurance would be used for repairs and putting the business back on track.

• Commercial property insurance premiums are tax-deductible for the business. This means that you can write off the amount that the business has paid the insurance coverage, reducing the taxable income.

CONs of Commercial Property Insurance

Commercial property insurance is bad because the coverage plan is limited. For instance, commercial property insurance does not cover floods, which means you need to purchase additional coverage. This automatically means you have to pay more premium to have full coverage for your business.

Is Commercial Property Insurance Worth it in Texas?

Commercial property insurance is worth it if you run a business that owns valuable assets. Physical businesses are susceptible to everyday perils, such as fire, theft, vandalism, and damage from burst pipes. Commercial property insurance is also worth it for a home-based business because it provides more coverage than a homeowners insurance policy. Whether commercial property insurance is worth it or not should be weighed against what will happen if you do not have the policy.

What Happens if you Don’t Have Commercial Property Insurance?

If you do not purchase commercial property insurance for your business, it becomes vulnerable when an unexpected event occurs. Commercial property insurance protects your business when it experiences loss by paying for the repairs or replacing business assets, including the business structure after disaster occurs. Without a commercial property insurance policy, you may experience the following:

• Financial loss in the event of unforeseen circumstances.

Picture in your mind that your business got completely destroyed. The building and all its contents, including the inventory are gone. How much would it cost to replace and rebuild? How long will it take before you could open the doors back for business? How are you and the employees getting paid during this downtime? Does your business have this amount of cash reserves available at all times?

If you do not have a current commercial property insurance for your business, explore purchasing a commercial policy that fits your business model best: general liability and/or other types of Texas business insurance policies. Speak to a state-licensed insurance agent to guide you through this process.

Why is Commercial Property Insurance Important?

Having commercial property insurance in Texas is important because it provides protection for the assets of the business. The business owner is able to mitigate the risk of losing everything, for a cost of the annual premium plus a predetermined deductible amount, paid in case of a claim.

What Happens When your Commercial Property Insurance Lapses?

When your commercial property insurance policy lapses, the coverage ends. This means that if your business experiences any unexpected loss event after the policy lapses, you will need to pay out of your own pocket for any financial cost incurred. Your commercial property insurance will lapse when you default on your premium payment even after the grace period afforded you in the policy. When you default, the insurance provider has the right to cancel your policy. An insurance policy lapse stays on your insurance record and may affect your business credit ranking.

Prevent lapses on your commercial property insurance by paying your annual premiums on time. If you have questions about commercial property insurance coverage in Texas, speak to a state-licensed insurance agent.