Anyone who owns a small business needs to understand what kind of policies they need to include in their renters insurance to keep from paying out of pocket for unforeseen damages and losses. This article will take you through everything you need to know about renters insurance for businesses, why your company needs it, what it covers, and how much it will cost you.
What is Renters Insurance?
Renters insurance is a type of insurance policy that provides coverage for individuals who rent their homes or apartments.
Renters insurance for businesses is not the same thing as renters insurance for tenants (also known as tenants insurance). Tenants insurance is a policy that protects tenants’ personal property and living expenses and provides them with liability coverage if someone gets hurt on the property.
Renters insurance as it applies to businesses isn’t one single policy. Renters insurance for businesses consists of several different insurance policies that provide companies that operate on rented property with protection from certain types of damages and losses, including:
- Bodily injury claims
- Property damage claims
- Defamation lawsuits
- Damage to or loss of your rented property or to items located within the property from fire, storms, vandalism, or theft
- Loss of revenue due to the temporary closure of your business as a result of damages
The most common types of renters insurance policies are general liability, commercial property, and business income insurance.
General Liability Insurance
General liability insurance can help protect your business from injury claims from customers or clients. For instance, let’s say you rent a building to run a coffee shop from, and a customer slips in a spilled beverage and takes a fall. General liability insurance can help cover their medical bills.
General liability insurance can also help pay for property damage claims. For example, if an employee accidentally knocks a patron’s laptop onto the floor and breaks it, general liability insurance can help pay for repairs.
General liability insurance can also cover property rented to you from damages to both the premises and inventory. For instance, if someone broke a window in your coffee shop and damaged your coffee grinders, your general liability insurance policy could help cover the costs of repairing or replacing those items.
Finally, general liability insurance can also help cover costs associated with personal injury claims of libel or slander. Let’s say an employee creates a false social media post about getting food poisoning from your coffee shop’s competition that causes the company to lose business.
General liability insurance can help pay for court costs for defamation claims the other business might bring against you.
Most small businesses will have–at a minimum–general liability coverage.
Commercial Property Insurance
Commercial property insurance can help you pay for damages that may occur to your business property. Going back to the coffee shop scenario, if an employee accidentally breaks a window when moving stock in your kitchen, general liability insurance can help you pay for the repairs. But if a fire erupts and destroys your inventory, commercial property insurance covers you.
Commercial property insurance can also help to protect your property from fire, storms, vandalism, and theft. It protects not only the property, but also covers tools, equipment, inventory, and other personal items stored within the building.
Business Income Insurance
If property damages temporarily close your business, business income insurance (also known as business interruption insurance) can help pay for any income you might lose from having your business temporarily shut down. Business income insurance can help cover income loss from fire, theft, and storms, and can also cover other routine expenses, such as rent, taxes, and payroll.
Let’s say a tornado hits your coffee shop and repairs are estimated to take six months. Business income insurance can pay for the revenue you would have generated during that time.
Your business income insurance policy can be extended to cover loss of income due to slower sales once your business reopens after damage. It may take some time after reopening to reestablish your clientele and restore your income to previous amounts. Business income insurance can help augment the lowered revenue during the slowdown period after you reopen.
Business Owner’s Policy
A business owner’s policy (BOP) is a way to combine general liability, commercial property, and business income insurance. Many business owners will combine property and liability insurance to save money and for more complete coverage.
Why Does My Business Need Renters Insurance?
Renters insurance can help protect you from paying out of pocket for property damage, income loss, or lawsuits.
Many landlords will not rent to a business unless it has renters insurance. You should talk to your landlord and find out what their insurance covers and what you are responsible for insuring.
You should consider purchasing renters insurance if your business operates out of a physical location or if you could be affected by lawsuits.
What Does Renters Insurance Cover?
Renters insurance covers the personal property and personal liability of the property’s tenant. Personal property includes electronics, furniture, and household goods that may be harmed in a loss such as a fire or stolen in a robbery. Liability is the protection from third-party claims of responsibility. For example, a common liability claim is a dog biting a neighbor.
What Business Renters Insurance Does Not Cover?
Renters insurance does not cover damages or losses due to intentional actions made by yourself or your employees.
General liability insurance does not cover auto accidents, employee injuries, employee illnesses, mistakes or errors made when providing professional services to clients, or any claims that exceed your liability limits.
Commercial property insurance does not cover customers damaging their own items while on your property, your employees damaging clients’ property, auto accidents, or flood damage.
Business income insurance does not cover the loss of undocumented income. You should maintain a record of your company’s income and expenses in a safe place outside your business’s physical location. Many business income policies do not cover damages caused by flooding or earthquakes. Business income insurance will only pay for losses from covered events.
How Much Does Renters Insurance Cost?
The cost of renters insurance depends on several factors, including your industry, the size and location of your business, your claims history, the kind and amount of equipment or inventory you need to have insured. Also on how many employees you have.
Renters insurance insures your business for either its replacement value or its actual cash value.
- Replacement value is how much it would cost to buy a brand-new replacement for an item or property.
- Actual cash value is your business’s replacement value minus depreciation.
- Depreciation is the reduction in the value of an item due to age, wear, or market conditions.
Your renter’s insurance will cost less if your property value is determined by the actual cash value method. This is because the actual cash value pays out less compared to when your property value is determined by its replacement value.
According to Insureon, a small business insurance marketplace, the average cost of the different types of renters insurance is as follows:
- General liability insurance costs around $50 per month.
- Commercial property insurance costs around $60 a month.
- Business income insurance prices vary depending on your unique business, but generally cost between $40 and $130 per month.
- A BOP costs around $99 per month. Many insurance companies will offer you a discount if you choose to combine more than one policy into a BOP.
Conclusion
Renters insurance for businesses is not the same thing as renters insurance for tenants. Tenants insurance is a policy that covers things like personal property, personal liability, and living expenses, while renters insurance for businesses consists of multiple policies that are designed to help protect you from paying out of pocket for damages, losses, and lawsuits against your business.
General liability insurance can cover bodily injury, property damage, and libel or slander claims from customers or clients. It also covers damage to your rented property or your inventory.
Commercial property insurance covers damages to both your business’s property and damages to or losses of items stored within the rented property.
Business income insurance covers loss of income and other expenses due to damages that cause your business to close temporarily.
A BOP combines property and liability insurance to help ensure full coverage.
Many landlords will not rent space to a business unless it has renters insurance.
Renters insurance doesn’t cover:
- Intentional damage caused by you or your employees
- Automobile accidents
- Employee injuries or illnesses
- Mistakes or errors made when providing professional services to your clients
- Claims that exceed your liability limits
- Loss of undocumented income
- Damages from scenarios not covered by your policy
The cost of renters insurance depends on the kind of policy or policies you purchase and the type of business you have.
Renters insurance is a low-cost way to protect your business and give you peace of mind. On average, general liability insurance costs $50 per month, commercial property insurance costs $60 per month, business income insurance costs between $40 and $130 per month, and a BOP costs around $99 per month.
