Commercial Tenant Contents Policy

Last verified: August 2026

What Tenant Contents Policy Covers

Coverage Forms for Tenant Contents

Commercial tenant BPP is available in three coverage forms with different breadth of protection:

Special form - Recommended:

• All-risk coverage: all perils covered except those specifically excluded
• Water damage from sprinkler discharge automatically covered
• Covers accidental damage, mysterious disappearance, and most perils
• Broader than named peril forms with fewer coverage gaps

Broad form:

• Named perils coverage with extended list of covered perils
• Specifically includes "sprinkler leakage" as a named peril
• More coverage than basic form but less than special form
• Lower premium than special form

Basic form - Limited:

• Named perils only: fire, lightning, explosion, windstorm, hail, smoke, vandalism, theft
• May not include sprinkler leakage unless specifically added
• Lowest premium but significant coverage gaps
• Not recommended for commercial tenants

Determining Adequate Coverage Limits

Tenant contents coverage limits should equal the full replacement cost of all tenant property:

Inventory valuation:

• Use peak seasonal inventory levels (holiday season, before large orders)
• Include raw materials, work in progress, and finished goods
• Value at replacement cost, not depreciated value or original cost
• Review and adjust limits annually or when business changes significantly

Furniture and equipment:

• Full replacement cost of all furniture, fixtures, and equipment
• Include leased equipment if lease makes tenant responsible for damage
• Don't forget less-obvious items: artwork, decorations, kitchen equipment
• Update values when purchasing new equipment or expanding

Tenant improvements:

• Full cost to rebuild improvements tenant owns per lease
• Include above-standard finishes, custom buildout, specialized installations
• Coordinate with lease: if landlord owns improvements, landlord must insure
• May need separate improvements and betterments sublimit increase

BPP values vary widely by business type. Retail stores carry significant inventory. Offices have computers and furniture. Restaurants need kitchen equipment coverage. Manufacturing requires machinery and materials protection. Warehouse operations may have very high inventory values including property of others.

Valuation Options: ACV vs Replacement Cost

Tenant contents can be insured on two valuation bases:

Actual cash value (ACV) - Standard on basic policies:

• Pays replacement cost minus depreciation for age and wear
• Lower premium but significant out-of-pocket costs at claim time
• Depreciation reduces claim payments, sometimes substantially
• Not recommended for most commercial tenants

Replacement cost (RC) - Recommended:

• Pays full cost to replace with new property of like kind and quality
• No depreciation deduction
• Requires actual replacement within policy time limit to receive full payment
• Higher premium but much better protection

Replacement cost settlement process:

1. Insurer pays ACV immediately after loss adjustment
2. Tenant replaces damaged property within policy time limit
3. Tenant provides proof of replacement (receipts, invoices)
4. Insurer pays additional amount (depreciation) to reach full replacement cost

Common Coverage Sublimits and Gaps

Standard tenant BPP policies include sublimits for certain property types. Review your policy declarations for specific limits and consider whether they adequately cover your property values:

• Money and securities: Limited coverage. Purchase separate crime coverage for significant cash holdings.
• Valuable papers and records: Limited sublimit. Schedule specific values or buy endorsement if you have important documents.
• Property of others: Limited sublimit. Increase if you hold customer goods, consignments, or bailments.
• Outdoor property: Limited sublimit for outdoor signs, furniture, or equipment. Schedule or increase sublimit as needed.
• Improvements and betterments: Often sublimited. Increase to actual improvement value paid by tenant.

Additional Coverage Options

Tenant contents policies can be enhanced with optional coverages:

Business income (interruption) coverage: Pays lost revenue when property damage suspends operations. Requires direct physical loss to covered property.

Extra expense coverage: Pays additional costs to minimize business interruption, such as temporary location rental, expedited shipping, equipment rental.

Equipment breakdown coverage: Covers mechanical breakdown of covered equipment (not typically covered under standard property policy). Important for manufacturing and technology businesses.

Accounts receivable coverage: Pays when records of money owed are destroyed and cannot be collected. Important for service businesses with customer invoices.

Electronic data processing coverage: Extended coverage for computers, software, and data restoration. May include increased data recovery limits.

Claim Filing Process for Sprinkler Damage

When sprinkler leak damages tenant contents:

1. Mitigate damage: Stop water flow, move property to dry area, protect undamaged items
2. Document loss: Take photos/video of damage, list damaged items, save samples
3. Report to insurer: File claim immediately (same day if possible)
4. Adjuster inspection: Provide access and complete inventory of damaged items
5. Proof of ownership: Provide purchase receipts, invoices, or other evidence of value
6. Loss settlement: Insurer determines covered loss and makes payment (minus deductible)
7. Replacement: For replacement cost policies, replace property and submit receipts for additional payment