Business Insurance  /  Business Property Insurance

Commercial Coverage

Business Property Insurance
— Protecting What You’ve
Built and What You Own.

Your building, your equipment, your inventory, your furniture — everything physical that makes your business run. If a fire, storm, theft, or other covered event damages or destroys it, commercial property insurance is what pays to replace it. Your landlord’s policy doesn’t cover what’s inside. This does.

What Business Property Insurance Covers

Coverage for the physical assets your business owns, uses, and depends on — at your location and beyond.

Commercial property insurance covers the physical assets of your business — the building if you own it, your equipment, furniture, inventory, computers, signage, and other contents — against damage or loss from covered causes including fire, lightning, wind, hail, theft, vandalism, and water damage from burst pipes. It is first-party coverage: it protects your own property, not your liability to others.

For most small businesses, property coverage is one of two things: a standalone commercial property policy, or the property component of a Business Owner’s Policy (BOP) that bundles property with general liability and business interruption at a discounted combined rate. A BOP is almost always more cost-effective than buying property and liability separately — and for businesses that need both, it’s the right starting point.

For tenants, this is especially important to understand: your landlord’s building insurance covers the structure — walls, roof, foundation. It does not cover anything inside your space. Your furniture, equipment, inventory, and improvements are your responsibility to insure. Every business in a leased space needs its own property coverage regardless of what the landlord carries.

“Your landlord’s insurance covers their building. It doesn’t cover your computers, your equipment, your inventory, or your buildout. If a fire hits your space, their policy fixes the walls. Yours is what replaces everything inside.”

Commercial property coverage is typically written at either actual cash value (what the property is worth today, after depreciation) or replacement cost (what it would cost to replace it with something new and equivalent). For most businesses, replacement cost is worth the additional premium — because actual cash value on two-year-old equipment pays significantly less than what it costs to replace it.

What commercial property insurance covers:

✓
Your building (if owned)
The structure itself — walls, roof, foundation, attached fixtures — against covered causes of loss
✓
Business personal property
Equipment, furniture, computers, tools, inventory, and other contents at your business location
✓
Tenant improvements & betterments
Renovations and improvements you made to a leased space — fixtures, built-ins, and custom buildouts that belong to you
✓
Fire and lightning
One of the most common and most costly property losses — covered under virtually all commercial property policies
✓
Wind, hail, and storm damage
Damage from severe weather events — particularly relevant in Texas where hail and wind events are frequent and significant
✓
Theft and vandalism
Loss or damage from theft of business property and vandalism to your location or its contents

Texas Property Insurance — What’s Different Here

Texas has specific property insurance considerations that every business owner in the state needs to understand.

Hail & wind — Texas’s biggest property risk

Texas leads the country in hail and wind damage claims. DFW specifically is one of the most hail-prone metro areas in the United States. Most commercial property policies cover wind and hail, but many include a separate wind/hail deductible — often expressed as a percentage of the insured value rather than a flat dollar amount. A 2% wind/hail deductible on a $500,000 building means a $10,000 out-of-pocket before coverage kicks in on a storm claim. We review deductible structure carefully when placing Texas property coverage.

Flood is excluded — and it matters in Texas

Standard commercial property policies exclude flood damage — water that comes from outside the building due to storm surge, overflowing rivers, or heavy rainfall. Texas has experienced catastrophic flood events that affected businesses far outside designated flood zones. If your business location has any flood exposure, a separate flood insurance policy is needed. We discuss flood exposure for every commercial property client, regardless of whether they’re in a mapped flood zone.

Actual cash value vs. replacement cost matters more in Texas

After a major Texas weather event — a significant hail storm, a tornado — the difference between ACV and replacement cost coverage becomes very real very quickly. A roof that was five years old at the time of a hail loss pays out significantly less under ACV than what it costs to replace it. For most Texas businesses, replacement cost coverage on the building and contents is worth the additional premium — the gap between ACV and replacement cost on a major claim can be substantial.

Standalone Property vs. Property in a BOP

For most small businesses, a BOP is the more cost-effective way to get property coverage in place.

Both options cover your business property — the difference is what else comes with it and what it costs. Here’s how to think about which structure is right for your business.

Standalone Commercial Property Policy

Property coverage on its own — right for some businesses

A standalone commercial property policy covers only the property component — the building, contents, and tenant improvements. It doesn’t include liability or business interruption unless specifically added. It may be the right fit when your property exposure is unusually large or complex, when your liability is already covered through another program, or when your operation doesn’t qualify for a standard BOP.

  • Right for large or high-value property — warehouses, manufacturing, significant equipment

  • Right when GL is already placed separately through a specialty program

  • Right for operations that don’t qualify for standard BOP underwriting

  • More flexibility on limits, deductibles, and coverage structure

Property Through a Business Owner’s Policy (BOP)

Property + liability + business interruption bundled — right for most small businesses

A BOP bundles commercial property with general liability and business interruption coverage at a discounted combined rate. For most small businesses, this is the most cost-effective starting point — you get property coverage plus the liability protection you need at a lower combined price than buying them separately.

  • Lower combined premium than buying property and GL separately

  • Includes business interruption — income replacement if a covered loss closes you temporarily

  • One policy, one renewal date, one payment

  • Right for most businesses under $5M revenue with a manageable physical footprint

Our recommendation: If your business qualifies for a BOP and you need both property and liability coverage — which most businesses do — start with a BOP. It’s almost always the more cost-effective structure. We’ll tell you upfront if your operation is better served by standalone property coverage and why.

Actual Cash Value vs. Replacement Cost

How your property is valued at claim time is one of the most important coverage decisions you make.

The same property claim pays out very differently depending on which valuation method your policy uses. Understanding the difference before a loss is how you avoid a painful surprise after one.

Actual Cash Value (ACV)

Depreciated value — what it’s worth today

ACV pays what the damaged or destroyed property was worth at the time of the loss — its replacement cost minus depreciation for age and wear. An older roof, aging equipment, or used furniture pays out less than its replacement cost. ACV policies typically have lower premiums, but the out-of-pocket gap between what the policy pays and what replacement actually costs can be significant on major claims.

Example: A 7-year-old HVAC system at a restaurant is destroyed in a fire. Replacement cost is $15,000. ACV at year 7 of a 15-year useful life might pay $7,500 — half the replacement cost. The business owner pays the $7,500 difference out of pocket.

Replacement Cost Value (RCV)

Full replacement — what it costs to replace it new

Replacement cost pays what it actually costs to repair or replace the damaged property with a new equivalent — regardless of the age or condition of the original. No depreciation deduction. For most businesses, replacement cost is worth the additional premium because it eliminates the gap between what insurance pays and what recovery actually costs. In Texas, where major weather events regularly total property, this distinction matters significantly.

Example: The same 7-year-old HVAC system under a replacement cost policy pays the full $15,000 to replace it with a new equivalent unit. The business owner pays only the deductible — not the depreciation gap.

Who Needs Commercial Property Coverage

Any business that owns, leases, or depends on a physical location or physical assets to operate.

If your business would suffer a financial loss from damage to your location or the contents inside it — you need property coverage. That includes tenants, not just property owners.

Restaurants & Food Service

Kitchen equipment, refrigeration, inventory, and the buildout represent significant property value. A fire or equipment failure without property coverage can be a business-ending financial event.

Retail Businesses

Inventory, fixtures, displays, and equipment at a retail location all require property coverage. Theft and vandalism are also significant risks for retail operations with valuable inventory.

Professional Offices

Computers, servers, office furniture, and tenant improvements in a leased office space aren’t covered by the landlord. Every professional service business in a leased space needs its own property coverage.

Contractors with a Shop or Yard

Contractors who store materials, equipment, and vehicles at a fixed location have significant property exposure at that location — separate from the mobile equipment coverage that inland marine provides.

Salons, Gyms & Personal Services

Specialized equipment, fixtures, and tenant improvements in service businesses represent meaningful value that a landlord’s policy doesn’t cover. Property coverage protects that investment.

Manufacturers & Warehouses

Large inventory values, specialized equipment, and significant building exposure make property coverage critical — often at limits and with coverage structures beyond what a standard BOP provides.

Property Owners

Businesses that own their building need property coverage for the structure itself in addition to the contents. Owned buildings require adequate replacement cost limits that reflect current construction costs.

Any Business in a Leased Space

Your lease doesn’t protect your stuff — your property coverage does. Tenant improvements, equipment, furniture, and inventory in any leased space are the tenant’s responsibility to insure.

Real Scenarios.

What property losses look like for Texas businesses — and what coverage determines.

01
A hail storm damages a commercial roof and HVAC units
A severe hail storm causes significant roof damage and destroys rooftop HVAC units at a retail location. The landlord’s property insurance covers the building structure. The tenant’s commercial property policy covers the HVAC units, interior damage, and any tenant improvements affected. Understanding who owns what — and what each policy covers — determines who pays after a Texas hail event.

03
A break-in results in significant theft and vandalism
Thieves break into a contractor’s shop overnight, stealing tools, equipment, and materials — and vandalizing the space before leaving. Commercial property covers the theft of property at the fixed location and the vandalism damage. The inland marine policy covers the mobile tools and equipment. Both policies work together to address the full scope of the loss.

05
A tornado damages a building owned by the business
A tornado causes major structural damage to a building owned by a small business. If the policy is written at replacement cost, it pays what it actually costs to rebuild. If it’s written at ACV, it pays the depreciated value — which may be significantly less than current construction costs. For owned buildings, adequate limits at replacement cost are critical in Texas where severe weather events regularly cause total or near-total losses.

02
A kitchen fire destroys restaurant equipment and forces closure
A grease fire damages a restaurant’s kitchen, destroying the hood system, cooking equipment, and surrounding buildout. The property policy covers the physical damage. Business interruption coverage (typically included in a BOP) covers the income lost during the weeks of restoration. Without both, the restaurant owner faces a property loss and an income loss simultaneously — often a combination that permanently closes the business.

04
A burst pipe floods an office and destroys computers and furniture
A pipe bursts over a holiday weekend and floods a professional services office. The landlord’s insurance covers the building damage — the water-damaged walls and flooring. The tenant’s commercial property policy covers everything inside — the computers, furniture, equipment, and tenant improvements. Without the tenant’s own coverage, everything inside is replaced entirely out of pocket.

06
A retail business’s inventory is damaged by a storm
A severe rainstorm causes water intrusion through a damaged roof at a retail location, destroying a significant portion of inventory. Commercial property covers the inventory loss. For retail businesses with seasonal inventory or high-value stock, making sure the insured value reflects current inventory levels — not a stale estimate from policy inception — is important for getting a full settlement after a loss.

Why Get Your Property Coverage Through McKnight

The right property program for a Texas business requires more than a standard quote.

Texas property insurance has nuances that matter — hail and wind deductible structures, flood exclusions, the ACV vs. replacement cost decision, and whether a BOP or standalone policy is the right fit for your operation. We review each of these specifically rather than just running a quote at whatever defaults the system suggests.

We also make sure property limits are set correctly. Underinsurance is a common and costly problem — a business that insures a $400,000 buildout for $200,000 because that’s what the equipment was purchased for years ago has a real gap at claim time. We walk through replacement cost estimates and make sure limits reflect what it would actually cost to replace your property today, not what you paid for it years ago.

For most small businesses, we also evaluate whether a BOP gives you a better overall program at a lower combined price than placing property and liability separately. As an independent agency across 100+ carriers, we can compare both structures and recommend the one that makes the most sense for your operation and budget.

Texas-specific coverage reviewed
Hail deductibles, flood exposure, ACV vs. RC — we address the Texas-specific details before placing any property coverage.

Limits set at actual replacement cost
We walk through what it would cost to replace your property today — not what you paid for it — so limits reflect real exposure.

BOP vs. standalone — honest recommendation
We compare both structures and tell you which one gives you the best program for your operation and budget.

Real answers when you call
817.277.6166, weekdays 8:30–5pm. Property questions, a claim after a storm, or coverage review — we pick up.

FAQ

Business property insurance questions we hear all the time.

Does my landlord’s insurance cover my business property?
No — your landlord’s insurance covers the building structure: the walls, roof, foundation, and common areas. It does not cover anything inside your leased space — your furniture, equipment, computers, inventory, or tenant improvements. If a fire or storm damages your location, your landlord’s policy repairs the building. Your commercial property policy is what replaces everything inside. Every business in a leased space needs its own property coverage regardless of what the landlord carries.
What’s the difference between actual cash value and replacement cost?
Actual cash value pays what your property was worth at the time of the loss — replacement cost minus depreciation for age and wear. A five-year-old piece of equipment pays out less than a new equivalent under ACV. Replacement cost pays what it actually costs to replace the damaged property with a new equivalent, regardless of age. Replacement cost policies typically cost more in premium, but the gap between ACV and replacement cost on a major claim can be substantial — especially in Texas where weather events regularly cause significant losses to property of all ages.
Is it better to get standalone property or a BOP?
For most small businesses that need both property and liability coverage — which is the majority — a BOP is almost always more cost-effective. A BOP bundles commercial property, general liability, and business interruption at a combined rate that’s typically lower than buying them separately. Standalone commercial property makes more sense for businesses with large or complex property exposure, businesses that need a specialty liability program, or operations that don’t qualify for standard BOP underwriting. We compare both and recommend the right structure for your situation.
Does commercial property cover flood damage in Texas?
No — standard commercial property policies exclude flood damage — water that comes from outside the building due to storm surge, overflowing rivers, or heavy rainfall. Texas has experienced major flood events that affected businesses far outside designated flood zones. If your business has any flood exposure, a separate flood insurance policy is needed. We discuss flood exposure for every commercial property client regardless of whether they’re in a mapped flood zone, because Texas flooding regularly surprises businesses that assumed they weren’t at risk.
What is a wind/hail deductible and how does it work in Texas?
Many Texas commercial property policies include a separate, higher deductible specifically for wind and hail claims — separate from the standard deductible that applies to other covered causes. This wind/hail deductible is often expressed as a percentage of the insured value rather than a flat dollar amount. A 2% wind/hail deductible on a $500,000 building means $10,000 out of pocket before the policy pays on a wind or hail claim. Understanding your deductible structure before a storm hits — not after — is one of the most important things we review with every Texas property client.
How do I know if my property is insured for the right amount?
The right amount is what it would cost to replace or rebuild your property at current prices — not what you paid for it years ago, not the assessed value for tax purposes, and not an estimate that hasn’t been updated since the policy was placed. Underinsurance is a common problem: a business that insures a $300,000 buildout and equipment package for $150,000 has a real gap at claim time. Construction costs and equipment prices have increased significantly in recent years, which means many businesses are carrying limits that haven’t kept up with replacement costs. We walk through a replacement cost estimate when setting up your property coverage so limits reflect reality.
Does property insurance cover my equipment breakdown?
Standard commercial property insurance covers physical damage to equipment from covered causes — fire, storm, theft. It does not cover mechanical or electrical breakdown — when a piece of equipment simply fails without external cause. A compressor that burns out, a commercial refrigerator that stops working, or a boiler that fails mechanically is an equipment breakdown claim — separate from property. Equipment breakdown coverage is typically added as an endorsement to a commercial property policy or BOP. For restaurants, manufacturers, and any business where equipment failure creates significant financial exposure, it’s worth specifically adding.

Get Started

Let’s make sure what you’ve built is protected — at limits that reflect what it would actually cost to replace it.

Call us or request a quote. We’ll review your property exposure, the right coverage structure for your operation, and the Texas-specific details that matter for any business in the DFW area.

McKnight Insurance Services  ·  Mansfield, TX  ·  Weekdays 8:30am–5pm