If you’re renting office space for your company, having your own business insurance policy is a must. Even though the property owner or landlord is responsible for having insurance on the physical building, business insurance helps protect belongings and mishaps that are your responsibility, says Loretta Worters, vice president, Insurance Information Institute (III).
Plus, Worters says, “More and more frequently, landlords are requiring insurance from their commercial tenants. Often they won’t rent to you unless they have proof that you have a business insurance policy.”
Depending on the type of business you run, Worters says a standard business owners’ policy (BOP) might be a good starting point. It typically includes property, liability and business interruption coverage. Having A Dedicated Agent Can Make All The Difference.
Typical Coverages in a Business Owners’ Policy
Property Coverage: For Your Business’ Belongings. This coverage may reimburse you if your company’s property (material goods) is damaged during a covered loss such as theft or a fire, explains Worters.
For instance, while your landlord’s policy may cover fire damage to the building itself, your insurance provider could step in to cover your company’s damaged computers, furniture, phone systems, employees’ belongings and more, she says.
If your office was the target of a break-in, belongings that are stolen or damaged would typically be covered by your business insurance.
The building owner’s insurance would only cover damage to the physical building, such as broken windows, doors, or locks, says Worters.
“If there was a hail storm that did damage to the roof or blew out windows of the office building, that would fall under the purview of the owner,” says Worters. The building owner’s insurance — not your business’ — would be responsible for the damages.
Liability Coverage: For Your Business’ Legal Protection. This is the traditional “slip and fall” insurance with which most business owners are familiar.
If a visiting customer tripped and broke her ankle in your office, rather than a common area of the building, the liability coverage on your BOP could reimburse your customer for her medical bills, Worters explains.
Liability coverage could also pay for legal costs or damages from a lawsuit if the injury was proven to be the result of your negligence. Since the slip occurred in your rental office, your landlord’s insurance would not be involved, Worters says.
Your liability insurance may also reimburse you if you or your employees damage the space you’re renting and are found financially responsible for repairs.
Business Interruption Coverage: For Your Business’ Earnings After A Loss. This coverage is intended to help cover your company’s net profits and continuing expenses for a set period of time after a covered loss, according to the Insurance Institute for Business & Home Safety (IIBHS).
Example: A fire seriously damages your rented office and you temporarily relocate. However, some key clients don’t follow you to your temporary office and therefore your profits drop.
With business interruption coverage, your policy would typically reimburse your business for profit losses, based on financial records, after you deduct ongoing business expenses you would have had to pay anyway, says the IIBHS.
Depending on your policy, Worters says the “extra expense” portion of your business interruption coverage could also help you recoup costs like additional rent, plus the difference between your utility costs at your new office if they are higher.
The basic coverages in your business owners’ policy are a good start to helping protect your business. Depending on the kind of business you run, Worters says you might consider adding additional coverages to your policy. A business insurance agent can suggest coverage to help protect your business and its specific needs.