How Much Insurance Do You Need for a Commercial Building?

If you own a commercial building in Michigan—whether you run your own business or lease it out to tenants—having the right amount of insurance is critical.

But how much coverage do you actually need? Let’s break down the key areas to focus on when determining the proper insurance limits for your commercial property.

1. Start With the Replacement Cost of the Building

One of the biggest mistakes commercial property owners make is confusing market value with replacement cost. Insurance should be based on how much it would cost to rebuild the structure from the ground up—not how much you could sell it for.

Key factors in calculating replacement cost include:

Year built: Older buildings may require specialized labor or materials, which can increase the cost to rebuild.
Square footage: Larger buildings will require more materials and labor, increasing the replacement cost.
Construction type: A steel and brick structure will have a different cost than a wood-frame building.

Having an accurate replacement cost ensures you don’t fall short in the event of a total loss.

2. Don’t Forget Business Personal Property Coverage

If you own and operate the business out of the building, make sure your policy also covers everything inside the building—like furniture, fixtures, inventory, and equipment. This is called Business Personal Property (BPP) coverage.

Even if you lease the space to a tenant, it’s important to clarify who is responsible for insuring which items. Landlords typically cover the building and any owned fixtures, while tenants should insure their own property.

3. Consider Business Interruption Insurance

If a covered claim (like a fire or storm) prevents you from operating your business, business interruption insurance helps replace the income you lose during the downtime.

For landlords, this coverage can also be applied to loss of rental income while the building is being repaired.

4. Different Roles, Different Responsibilities

The type of insurance you need also depends on whether you are:

A landlord – Focus on protecting the structure, common areas, fixtures you own, and income from rent.
An owner-occupant – Make sure both the building and your business operations are fully protected.

In both cases, a properly structured policy should reflect your exposure and help ensure your financial stability if a loss occurs.

5. Evaluate Location-Based Risks

Some risks may not be covered under a standard commercial property insurance policy—flood and earthquake being two of the biggest examples.

If your property is in a flood-prone area in Michigan or near a body of water, you’ll likely need a separate flood insurance policy to be protected.

Final Thoughts: Work With a Professional Who Understands Michigan Businesses

Every building and every business is different. Your insurance coverage should reflect that. The most effective way to make sure you have enough and the right type of coverage is to work with an experienced insurance advisor who understands Michigan’s commercial insurance landscape.

Whether you’re a landlord with multiple properties or a business owner operating out of one location, having the right commercial property insurance can be the difference between staying afloat or facing major financial setbacks after a loss.

Need help reviewing your commercial property coverage?

We’re here to make sure you’re protected—reach out today for a no-obligation review of your insurance needs.

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