Every business with a physical location needs commercial property insurance, but exactly what your policy covers can vary depending on your specific industry and operations—and your location. Texas has its own unique insurance requirements, as well as topography and weather patterns that differ from other states, which all play into how your policy is written. Commercial property insurance in Texas is different from similar policies in other parts of the country in some specific ways. It’s important for business owners in the state to understand those differences to make sure they are properly covered.
What makes commercial property insurance in Texas unique?
Commercial property insurance is standard everywhere in the sense that it pays to repair or replace your property if it’s damaged by a fire, storm, or other covered event, and can even cover some of your lost income. Aside from that foundation, here’s how this policy is typically tailored for Texas:
Weather-Related Risks
Texas is particularly susceptible to various natural disasters. This includes hurricanes along the Gulf Coast, tornadoes in the north and central regions, as well as frequent hailstorms and potential flooding. These weather-related risks significantly impact the insurance landscape. Insurers may charge higher premiums to account for these increased risks, and the policies might include specific conditions or exclusions related to these natural events. Businesses need to ensure they have adequate coverage for the types of events that commonly occur in Texas, and be sure to read the fine print for exclusions.
Economic Factors
Texas has a diverse and robust economy that’s known for being business friendly. The state has embraced companies in sectors like oil and gas, technology, and agriculture, which presents unique scenarios in commercial property insurance. If your company sits in a high-risk industry, such as oil and gas, it may require specialized insurance products. Additionally, the economic growth in Texas can lead to increased property values and construction activity, influencing insurance needs and costs.
Size And Diversity
The vast size and geographical variety of Texas means that insurance needs and risks can vary greatly across different regions. For instance, a business in a coastal area like Houston would have different insurance considerations (like hurricane and flood risks) compared to a business in a more inland city like Dallas, where tornadoes might be a greater concern. This regional variation requires insurers to offer tailored solutions, and businesses must be aware of their specific local risks when choosing their commercial property insurance in Texas.
Rural Areas And Lack Of Local Protections
Because a large portion of Texas is rural, some areas lack local protections that are standard in urban regions. For example, the number of fire departments in rural Texas can be limited. This lack of local infrastructure can lead to properties being classified as higher hazard due to longer response times in case of emergencies like fires. Consequently, insurance companies might assess these properties as higher risk, leading to higher insurance premiums. If your business is located in a rural area, it's crucial to be aware of the infrastructure limitations that might put you at additional risk.
Coastal Property Insurance Requirements
Properties located in counties along the Texas coast often require insurance through specialty carriers that focus on coastal properties. These carriers are more experienced in dealing with the risks associated with coastal areas, such as hurricanes and flooding. However, policies from these specialty carriers often come at higher rates compared to inland insurance options. This is due to the increased risk of significant damage from coastal storms and the higher cost of rebuilding in these areas. Businesses owning properties in these coastal regions need to budget accordingly for higher insurance costs.
Challenges Policyholders Face With Commercial Property Insurance In Texas
While these challenges aren’t necessarily isolated to Texas and can be found in areas across the U.S., they can be more of an issue for business owners in the Lone Star State due to the unique factors listed above.
- Higher Rates: Economic factors such as inflation, the increased cost of building materials, and labor have contributed to the sharp rise in insurance rates. Plus, the frequency and severity of natural disasters, particularly hurricanes, floods, and hail storms, have led insurers to adjust their pricing models to account for higher risks.
LandesBlosch is seeing increases from 10% to 40% in higher-risk areas of Texas.
- Higher Deductibles: Claims frequency is prompting insurers to increase deductibles, particularly for wind and hail, to share the risk with policyholders on commercial property insurance in Texas. Higher deductibles can make insurance more affordable monthly, but could pose significant financial risk to property owners if damage occurs.
- Fewer Insurance Companies: Due to the high risk of insuring Texas properties, especially in disaster-prone areas, insurers are hesitant to enter the market or are leaving it, leaving business owners with fewer choices and less flexibility.
- More Surplus Lines: With the standard insurance market constricting, high-risk properties are being forced to consider surplus lines for coverage. While surplus lines can provide necessary coverage, they often come at a higher cost and with less regulatory protection.
Typical Coverages For Commercial Property Insurance In Texas
While every business is different, most people need these coverages in their commercial property policy:
Building Coverage
This protects against damage to the physical structure of your business premises. Texas property owners should ensure their policy covers the full replacement cost, not just the actual cash value (this accounts for depreciation and could be significantly less than what is needed to rebuild after a loss). Given the rise in costs for materials and labor, it’s vital that you periodically reassess your coverage limits to avoid being underinsured.
Contents Coverage
Contents coverage protects the property you own inside the building, such as office furniture, equipment, computers, and inventory. This coverage can help replace these items if they're destroyed by a covered event. Business owners in Texas should take inventory regularly and adjust their coverage limits to reflect any new purchases or changes in inventory value.
Business Income
Also known as business interruption insurance, this coverage can compensate you for lost income and fixed expenses during a period where you cannot operate due to damage caused by a covered loss, such as a fire or storm. It’s important to understand the policy’s period of indemnity, or how long coverage will be provided, to ensure it’s sufficient for your business to recover.
Ordinance & Law
When a building is damaged, and repairs or rebuilding are necessary, local Texas laws may require the property to be updated to current building codes. Ordinance or law coverage pays for these additional costs. For Texas property owners, this can include updates to wiring, plumbing, or structural elements of a building that were grandfathered in under older codes but must be updated after a loss.
Flood
Standard commercial property insurance in Texas typically excludes flood damage. Flood insurance must be purchased separately, often through the National Flood Insurance Program (NFIP) or from private insurers. Given Texas' history with flooding, this coverage is crucial for most property owners, even those not located in designated flood zones, as floods can happen anywhere and are often catastrophic.
General Liability
This coverage protects business owners from financial loss should they be sued for causing harm to a third party, such as bodily injury or property damage. General liability is a foundational coverage for Texas businesses, as it can protect against claims resulting from accidents on the property, product liability, and other liabilities that arise from business operations.
8 Tips To Lower Property Insurance Costs In Texas
The price of insurance isn’t going down anytime soon, but there are certain strategies you can use to help manage costs so your business can afford the coverage it needs. Here’s our advice on how to get the best quality, most affordable commercial property insurance in Texas:
1. Increase your property deductible.
Opting for a higher deductible can significantly reduce the premium. Just make sure you can afford to pay the higher deductible out of pocket in the event of a claim. It's all about striking a balance between the immediate savings on premiums and potential costs when a loss occurs.
2. Lower the building’s value.
You can also lower your premium by adjusting the insured value of your building to more accurately reflect its current market value or replacement cost. Be cautious here—we are not recommending you intentionally underinsure, which can result in significant out-of-pocket expenses if you need to rebuild after a loss. Instead, be sure to consistently reassess the actual value of your building and update the insurance coverage accordingly.
3. Consider removing optional coverages.
Review your policy for optional coverages that may no longer be necessary. For example, if certain risks are no longer relevant or if the business can self-insure for certain exposures, removing these coverages can lower the premium on your commercial property insurance in Texas.
4. Keep your roof in good condition.
The condition of the roof is a significant factor in insurance costs, especially in areas of Texas that are prone to wind and hail. A well-maintained roof can lead to discounts and lower premiums. Property owners should consider periodic inspections and maintenance to ensure their roof is in the best possible condition.
5. Don't panic if you get non-renewed.
If an insurer decides not to renew your policy, it's not necessarily a reflection of the risk or your business—it might be more about the overall market scenario for that insurer. Shop around for new coverage options. In some cases, non-renewal can lead to finding a better rate or more comprehensive coverage with another insurer on commercial property insurance in Texas.
6. Get loss runs from the previous owner if purchasing a new property.
Loss runs are reports that show the history of claims on a property. Obtaining these from the previous owner can provide insight into the property's history that may influence insurance costs. A property with few or no claims could be positioned for lower rates, while a history of frequent claims may necessitate additional risk mitigation strategies to qualify for better rates.
7. Improve security measures.
Installing security systems, fire alarms, sprinkler systems, and other safety features can not only deter theft and reduce the likelihood of damage, but can also qualify you for lower insurance rates.
8. Build a relationship with insurers.
Developing a long-term relationship with an insurer may provide leverage to negotiate lower rates, especially if you have a good claims history and take proactive steps to reduce risks.
Best Property Insurance Companies In Texas
When purchasing commercial property insurance in Texas, it's important to differentiate between non-coastal and coastal providers—each will specialize in covering specific risks, like flooding and hurricanes. Below are some of the most reliable and trustworthy insurance companies to work with, categorized by the type of area. When you’re ready to look at pricing, LandesBlosch can help you get a quote from all of them and compare your options.
Non-Coastal Insurance Companies
EMC Insurance Companies
Known for a broad range of products tailored to business property insurance, EMC is a choice for non-coastal property owners due to their competitive pricing and strong financial stability. They offer a variety of coverage options that can be tailored to the specific needs of a business, and they have a reputation for fair claims handling.
Travelers
As one of the largest insurance companies in the United States, Travelers provides comprehensive property insurance policies with extensive coverage options. They are well-regarded for their risk management services and customer support, making them a reliable choice for Texas businesses located away from the coast.
Chubb
Chubb is noted for its custom-tailored insurance solutions and its capacity to insure high-value properties. Their underwriting expertise allows them to provide coverage for a wide range of business risks, and they offer superior claims service. Chubb also provides value-added services, such as loss prevention and risk assessment programs.
Coastal Insurance Companies
CrossCover Insurance Services
Specializing in properties located in coastal regions, CrossCover Insurance Services offers tailored solutions that address the unique risks of these areas, such as wind damage. Their expertise in coastal properties makes them a strong option for property owners seeking comprehensive coverage that accounts for the higher risk of storm-related damage.
Velocity Risk
Velocity Risk provides property insurance for both personal and commercial properties in coastal zones. They offer specialized coverage that includes windstorm protection, which is crucial in hurricane-prone areas. Their policies are designed to meet the complex needs of coastal property owners, and they have a streamlined claims process to help businesses recover quickly after a loss.
The Bottom Line
Running a business in Texas comes with some risks that you would face anywhere, and others—like extreme weather and high-risk industries—that are unique to the state. LandesBlosch has over 100 years of experience helping businesses find the right coverage at the right cost, and we can help your organization, too. Contact us to get a free quote on commercial property insurance in Texas today.
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