After years of dreaming, sweating and hustling, you've finally checked off all the boxes on your small business checklist. You've got a business plan, a name, a legal structure, licenses, marketing and distribution services, an accounting pipeline, all the employees you need and even a shiny new workspace with shiny new equipment. Now all that's left to do is roll out to the public.
Not so fast, thanks to that "shiny new workspace with shiny new equipment" bit. If your business occupies or uses commercial property, there's a pretty good chance you're going to need commercial property insurance if you value peace of mind. But just as your vintage shoe restoration business is different from the chartered accounting service across the street, every policy varies widely.
If there's any chance of your commercial property being affected by theft, fire or natural disaster, expensive repair needs or even lost revenue – and there is definitely a chance of all of those things – then commercial property insurance is well worth considering. This type of coverage isn't just commercial building insurance; it covers property such as heavy equipment, computers, raw materials, inventory, supplies, furniture, fixtures and more, whether you rent or own the workspace – it can even cover property left in the care of your business. Consider this type of coverage virtually essential if your location houses physical assets upon which your business's revenue stream relies.
One thing you may not have to consider it, though, is legally essential. Laws vary by state, but while most states require employee-focused insurance coverage such as workers compensation, disability and unemployment, taking out a commercial property insurance policy is typically not required by law.
Commercial property insurance rates are just as wide-ranging and as diverse as the valuations of all the businesses in America. Your rate depends entirely on the size, nature and assets of your business, but to give a general idea of rates, you can take a look at some average figures.
According to 2017 data from HowMuch.net, commercial property insurance rates start at about $500 per year for small business owners, reaching heights of about $500,000 annually for larger corporations. On average, the same source estimates that you'll pay between $1,000 and $3,000 per $1 million of insurance coverage, with an average annual rate of $742. Though there's plenty of flexibility to account for, HowMuch estimates that most small businesses pay less than $1,000 for commercial property insurance each year.
To put those rates into perspective, a 2015 study from Insurance Journal and insurance company The Hartford found that the average small business property claim for theft was $8,000, the typical claim for fire damage was $35,000 and the average claim for water, wind or hail damage ranged from $17,000 to $26,000.
Commercial property insurance rates vary based on a whole spectrum of factors. Common variables include the structural integrity and safety factors of the commercial building itself, such as fire-proofing, sprinklers, construction materials and alarm systems, the rate of occupancy and foot traffic at the business site, the business's physical location (high crime rates often make for higher insurance rates) and overall risk factors. In a broad sense, insurers will determine your rate by multiplying the value of the property by its risk factors. To save a little scratch, it often helps to bundle your commercial property insurance with general liability coverage.
For the most part, commercial property insurance does not protect against war, earthquakes or "acts of God," such as dust, ice or sandstorms. For a more tailored look at individual rates, most insurers offer a commercial real estate insurance calculator or free estimates via their official websites.