Commercial fire insurance: 10 tips to reduce the risk of fire at your business

Every 23 seconds, a fire department responds to a fire. Fear of fire at your small business is justified. And prevention, as well as commercial fire insurance, could help.

A lot of commercial fire insurance protection comes from the right commercial property insurance. But when you dig into the details of fire insurance for your small business, you may need to go beyond a commercial property policy. NEXT explains what to know when looking for fire insurance and ways to prevent a fire at your business in the first place.

What is commercial fire insurance?

Commercial fire insurance helps provide financial reimbursement for fire-related damage to your small business.

A commercial fire policy package may include coverage for:

• Smoke damage.
• Property damage caused by firefighters.
• Damage to neighboring properties from fire.

Typically, commercial fire insurance isn't a single policy. Many people think of commercial property insurance when they think of coverage for fires. However, there are other types of business insurance that can also provide protection.

Commercial fire insurance could include:

1. Commercial Property insurance

Commercial property insurance can protect the physical assets in your business that you own, including structures, inventory, equipment, and other business property.

Many commercial property insurance policies let you choose between being reimbursed the actual cash value (which is the depreciated value of lost/damaged items) or the replacement value (also called replacement cost) that helps cover the cost of brand-new items. On most policies, you will pay a higher premium for a replacement value policy.

2. General Liability insurance

Commercial general liability insurance can cover injuries to customers and other non-employees if they're injured in a fire. It can also help protect from damages to your neighbor's property if a fire starts on your property.

3. A Business Owner's Policy

A business owner's policy, also known as BOP insurance, bundles general liability insurance and commercial property insurance into one policy. This coverage works well for many small business owners because it protects your business property and your business from some liability.

4. Business Income insurance

If a covered fire-related event forces you to close your business for repairs, and your business carries business income insurance, you may also be able to recover lost income.

Here's what can typically be covered by business income insurance:

• Relocation and equipment rental.
• Cleaning and repairs.
• Payroll and salary for employees.
• Net income you would have earned.
• Normal operating expenses.

Business income insurance usually has a set period of restoration, which means your policy gives you a fixed amount of time to make repairs.

In addition to just carrying insurance, there's a lot a business owner can do to help prevent fire risk at work.

10 tips to reduce the fire risk of your business

You can do a lot to reduce the fire risk of your business. Here are a few tips to get you started. 

1. Inspect fire supplies like extinguishers, alarms, and sprinklers regularly. You want a safeguard to work when you need it most.
2. Make sure all employees know where fire suppression supplies are. You can't be everywhere at once. Train your employees to handle emergencies.
3. Adjust insurance policies for fire if you upgrade equipment. Adequate insurance coverage is one of your best bets to protect your business from financial loss and potential ruin in the event of a covered fire event.
4. Clean all equipment regularly (or hire pros to do it). A leading cause of restaurant fires is dirty kitchen equipment. Do your best to help prevent fires with regular cleaning.
5. Reduce clutter. Don't give your fire extra fuel with scattered boxes and paper for kindling.
6. Label fire exits and practice fire drills. Your employees need to get everyone out of the building in the event of a fire. You can't run fire drills with your customers, but well-placed signs can help visitors leave the premises quickly.
7. Clear brush around the building. Natural vegetation can make fires bigger. Clear out any brush that may escalate a fire or make it difficult to extinguish.
8. Ban appliances prone to fires. Some high-risk appliances, like space heaters, are best left at home. Don't let employees put your business at risk.
9. If you own a restaurant, keep fire suppression up to code. Read more about common restaurant business insurance claims.
10. Prevent further damage if you do have a fire. For example, if your building gets damaged, take the time to prevent further damage from the elements.

How much does commercial fire insurance cost?

Typically, you buy commercial fire insurance through commercial property insurance. You can purchase commercial property coverage for as little as $17 monthly.

Many factors affect the cost of commercial fire insurance, including:

• How close you are to a fire department or hydrant.
• Having fire preparedness items like sprinklers in place.
• Flammability of materials or items in your business.
• Your business's proximity to another high-risk business.
• Geographic location to wildfire areas.

Is commercial fire insurance included with commercial property coverage?

Yes. Commercial fire insurance is often included with commercial property insurance. Commercial property insurance protects the physical assets that you own in your business, including structures, inventory, equipment, and other business property.

Consider additional coverage for more well-rounded fire protection. General liability can help protect from third-party injuries and damages. You may also want to consider a business owner's policy to bundle commercial property and general liability into a single package that's often more affordable than two standalone policies.

You should also consider the aftereffects of a fire. Can your business weather the financial losses and rebuild time to rebound? If not, business income insurance may be right for you.