Do I Need Business Renters Insurance?

If you rent a storefront for your small business (or plan to in the future), business renters insurance is likely a requirement for your lease. Even if your landlord doesn’t require you to carry small business renters insurance, you should still consider adding a renters insurance for business policy as part of your risk management plan. Doing so is a great way to lower your overall risks as a small business owner.

Read on to learn everything you need to know about business renters insurance, including what it covers, where to buy a policy, and how much it will cost you!

What Is Business Renters Insurance?

Business renters insurance is similar to homeowner’s insurance in that it covers certain accidents to the property and building you’re renting as a small business owner. Small business renters insurance is specific to your rental needs. So no matter what type of space you are renting (warehouse, large space, multiple small spaces, a proper storefront), there is a renter’s insurance option for you.

Most renters insurance for business policies are a combination of a general liability policy (covers basic accidents and disasters), commercial property protection, and coverage for items/supplies/equipment you may house inside your rental location.

Types Of Business Renters Insurance

A good business renters insurance policy will include a bundle of different coverage options to adequately insure your rental property and your personal property stored at your rental location in the event of a lawsuit, disaster, or accident. How you pay for those plans before and after a claim will depend on your needs.

When you sit down with an insurance expert or broker, you’ll need to decide between the two main types of business renters insurance options: a replacement cost policy (RCV) or an actual cash value policy (ACV). The two insurance plans offer different coverage and price options.

• Replacement Cost Policy (RCV): The replacement cost policy (RCV) costs more but will cover the full cost of replacing/repairing destroyed or stolen items.
• Actual Cash Value Policy (ACV): The actual cash value policy (ACV) is lower in cost but has fewer reimbursement options. This policy gives you a cash value reimbursement for your destroyed or stolen items after depreciation is considered.

What Business Renters Insurance Covers

Business renters insurance will bundle liability and property-specific policies for rentals. The combined policies will cover the same things as most general liability and property policies.

• Destruction Of Property Due To Fire/Smoke Damage: Business renters insurance will cover the cost of damage and destruction because of a fire or smoke damage.
• Damages You Or Your Employees Make To The Space: This aspect of coverage is very similar to the type of insurance coverage you would want as a tenant in a rented home or apartment; it covers minor damages to walls and floors, for example.
• Malicious Damage (Theft/Vandalism): If someone burglarizes or vandalizes your store or warehouse, the policy will cover the cost of cleanup and replacements/reimbursements for your property.
• Medical & Legal Fees If A Client Is Hurt: Traditionally called “Slip and Fall” coverage, general liability will help cover medical and legal fees after an accident involving a client or customer.
• Equipment Replacement After Damage/Destruction: Your policy will list the equipment and inventory it covers.

What Business Renters Insurance Doesn’t Cover

It’s easy to assume that when you get renters insurance for a business policy, you’re covering yourself from all disasters and all losses, but that’s not the case. Each policy has certain exemptions and/or additional endorsements to round out the policy.

• Floods: Water damage due to flooding is covered in a separate flood policy.
• Earthquakes: If you live in a place known for earthquakes, this will be an add-on to your rental insurance.
• Damage Due To Negligence: If the insurance agency can prove that the damage caused to the building was because of negligence or employee criminal activity, it does not have to fulfill the claim.
• Pest Problems: Your ant infestation isn’t your landlord’s problem. At least according to most business rental insurance plans. Your insurance agency won’t cover pest control or structural damage caused by pests.
• Loss Of Income Due To Closed Doors: Even if the accident or disaster is covered (such as a fire) for your personal property, the loss of business income is not covered. Business interruption insurance is the additional endorsement needed to insure income in the event of a loss.

How Much Does Business Renters Insurance Cost?

Cost may be a deterrent for some small business owners when looking at business renters insurance. Insurance is a purchase against your future, even though it can feel like you’re throwing away money you may not have for things that may never happen. It’s true that insurance is in the business of worst-case scenarios; however, your small business story shouldn’t end with an accident or unexpected disaster that forces you to close your doors.

There is no surefire way to predict what renters insurance will cost for your business. Many factors, including crime rate, location, number of employees, number of customers, and your general liability risks, will impact your overall costs.

Insureon has shown that 16% of small business owners pay less than $500 per year, and 42% pay between $500 and $1,000 annually for property insurance. It’s important to note that bundling commercial property insurance and general liability insurance into a policy known as a business owner’s policy (BOP) costs less per year than the policies might if purchased separately. Meet with a broker or insurance agent to calculate your monthly premiums.

Along with bundling, taking reasonable safety and security measures may help lower your premium.

Which Type Of Business Renters Insurance Do You Need?

When renting a business location, it’s important to sit down with the landlord and your lease agreement and outline what is specifically covered by their insurance plan. Once you know what’s covered and insured on their end, you can work to fill in the gaps with your own insurance. Here are some questions to ask yourself about your business as you start thinking about insurance:

• Are you renting a storefront? And how much foot traffic does it get?
• Do you conduct any part of your business online?
• Are you located in an area that sometimes experiences natural disasters (hurricanes, tornadoes, ice storms, flooding, wildfires)?
• Could you pay your employees’ incomes if your business was forced to close for a few weeks?
• Does your business depend on other businesses for supplies? Or is there a leader property that feeds into your property?

Standard Business Rental Insurance Policy

A good policy will bundle general liability and a basic commercial property policy. The general liability will protect you in the case of a lawsuit or if someone sustains an injury at your rental space and needs medical assistance.

With that standard general liability, you are also protected with legal representation in the event of a lawsuit due to slander or libel. The commercial property component will cover rental property damage caused by fire, theft, or even vandalism caused by rioters.

Additional Endorsements To Your Policy

If you are concerned about not being able to pay your employees if you have to close your doors or if you know you live in an area prone to flooding, you might consider extra coverage to ensure you are truly protected.

Business interruption insurance helps pay employees and protect lost income, flood insurance will protect from water damage, and Errors and Omissions insurance will help cover a lawsuit because of bad advice (if you’re in the business of charging money for advice, that is). Meet with an insurance agent or broker to discuss additional coverage options specific to your business.

Learn more about other types of business insurance you may need as a small business owner.

Where To Buy Business Renters Insurance

There are four easy steps for buying insurance: Know what insurance you need, gather your business documents, do some comparison shopping, and purchase! 

Websites such as Insureon, CoverWallet, and Coverhound offer comparison shopping, so you can view several offers at once. Start with a personal insurance company (perhaps where you have homeowners insurance or car insurance) and see if your company offers a bundle for including business insurance into your plan. Take that number and then compare.

Final Thoughts

Protecting your small business means properly insuring it. Rental insurance doesn’t have to be an extraordinary expenditure, and policies can often be found for low monthly costs with bundling options and risk management strategies.

Once you’ve itemized the gaps in coverage between your landlord’s policy and the policies you are looking into buying, you can decide what you need and go from there. An insurance expert will take the time to explain coverage options and walk you through types and choices. Now that you’ve finished this article, you can go into that meeting armed with more knowledge!

Stay up to date on small business insurance by checking out our business insurance blog posts.

Business Renters Insurance FAQs