The Small Business Guide To Renters Insurance

Do you rent a location to do business? If so, your landlord may require you to show proof of renters insurance before you sign a lease agreement. Just like home owner’s insurance, renters insurance covers certain accidents to the property and building you are renting, and even if it’s not required by your landlord, renters insurance should still be part of your business’s risk management plan. You are ultimately responsible for the items inside your rented building or liable in the event of an accident/disaster and renters insurance is the protection you need.

Here’s everything you need to know about business renter insurance including what it covers, where to find it, and how much it’ll cost.

What Is Business Renters Insurance?

Business renters insurance is for small business owners who are renting a business space. This type of insurance is specific to your rental needs, so no matter what type of space you are renting (warehouse, one large space, several little spaces, a storefront), there’s a renters insurance option for you. Most business renters insurance policies are a combination of a general liability policy that covers basic accidents and disasters, commercial property protection, and coverage for items/supplies/equipment you may keep inside a rental location. It is similar to a Business Owners Plan (a bundle of general liability and commercial property insurance) for small businesses that rent instead of own property.

What Business Renters Insurance Covers

A business rental insurance plan will bundle liability and property specific for rentals. So, together the insurance will cover the same things as most general liability and property policies.

• Destruction Of Property Due To Fire/Smoke Damage: Business rental insurance will cover the cost of damage and destruction because of a fire or smoke damage.
• Damage Due to Theft/Vandalism: If someone burglarizes your store or vandalizes your store or warehouse, the policy will cover the cost of clean-up 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 care to a hurt client or customer and help provide legal protection.
• Equipment Replacement After Damage/Destruction: Your policy will specifically list equipment and inventory that are covered.

What Business Renters Insurance Doesn’t Cover

It’s easy to assume that when you get insurance, you’re covering yourself from all disasters and all loss, 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 its own flood policy.
• Earthquakes: If you live in a place known for earthquakes (or perhaps a place–like I do–where every day you are reminded that the Cascadia Subduction Zone will destroy your world), 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, they do not have to fulfill the claim.
• Pest Problems: Your ant infestation is 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 (like 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.

Types Of Business Renters Insurance

A good business rental insurance policy will include a bundle of different coverage options to adequately insure your rental property and your personal property in the event of a lawsuit, disaster, or accident. However, how you ultimately 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. Here’s the breakdown:

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 also has fewer reimbursement options. In this policy, you are given a cash value reimbursement for your destroyed or stolen items after depreciation is considered.

Which Type of Business Renters Insurance Do You Need?

When you are renting a business location, it’s important to sit down with the landlord and your lease agreement and outline what is specifically covered in his/her 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 location? And how much foot traffic does it get?
• Do you conduct any part of your business on the internet?
• Are you located in an area of the world that sometimes experiences a natural disaster (hurricane, tornado, ice-storm, flooding, wildfires)?
• Could you pay your employee’s income if your business closed for a few weeks?
• Does your business depends 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 a 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 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. (See what a business renter’s plan covers above.)

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 look into some extra coverage to ensure you truly are protected. Business interruption insurance helps pay employees and protect lost income; flood insurance will protect from water damage due to flooding; 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.

How Much Does Business Renters Insurance Cost?

Cost may be a deterrent for some small business owners when they start to look at insurance. Insurance is a purchase against your future, and it can feel like 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, one-third of small businesses have to close their doors after a disaster, according to insurance broker Insureon. With those odds, most small businesses should consider insurance a routine expense.

There is no way to predict what renters insurance will cost for your business. There are many factors, including crime rate, location, number of employees, number of people who traffic your rental daily, and your general liability risks. Most small businesses pay around $36 a month for a standard policy (the median of businesses). Meet with a broker or insurance agent to calculate your monthly premiums.

Here are few ways to save on rental insurance

• Train employees on safety protocols
• Update sprinklers and smoke detectors
• Update security systems

Taking reasonable safety and security measures may help lower your premium.

Where To Buy Business Renters Insurance

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

Websites like 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.

Getting Started

Renters may assume that their landlords are fully covered in the event of a disaster or accident, but your landlord’s commercial property insurance isn’t designed to protect you specifically. Protecting your business means insuring yourself properly — and rental insurance doesn’t have to be an extraordinary expenditure. 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 — and now you can go into that meeting armed with a bit more knowledge.