What does commercial property insurance cover in Texas—and what may require separate coverage?

By Mark Melliand, owner, Melliand Insurance Agency · 13 years as an independent agent · Published October 26, 2026

The short answer: Commercial property insurance can help pay to repair or replace a building and business property after covered damage, and may also cover some lost income (Texas Department of Insurance). What’s actually covered depends on the property described in the policy, the causes of loss it covers, and its limits, valuation terms, deductibles, exclusions and endorsements. That’s true whether property coverage is bought on its own, in a commercial package or within a business owner’s policy (BOP), and those arrangements don’t necessarily have identical terms.

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What property may be insured

These descriptions come from one widely used standard property form (sample building and personal property form, illustrative, ISO CP 00 10, 2012 edition). Your policy’s definitions control.

Building. If building coverage is purchased, the sample form includes the building plus items such as permanently installed machinery and equipment and fixtures. Tenants don’t automatically need to insure the building, but a lease may assign that responsibility.
Business personal property. Your furniture, equipment, inventory and other covered contents. The sample form also includes certain leased personal property you have a contractual responsibility to insure.
Tenant improvements and betterments. The tenant’s insured interest in qualifying improvements, subject to the policy definition and the lease.
Personal property of others. Property belonging to others that’s in your care requires applicable coverage and limits; it isn’t automatically insured. That’s also different from liability for damaging someone else’s property, which is a liability insurance question.
Location. Coverage away from the described premises, in vehicles, in transit, outdoors or for electronic data may have separate conditions and sublimits. Ask which extensions apply and what limits are shown in your policy.

Not everything is covered automatically. The sample form lists property not covered, such as money and paved surfaces, and limits electronic data. Listing a location alone doesn’t establish coverage; the declarations, limits and forms do. For the building and location details insurers may ask about, see our guide to what building and location information you need for a commercial property quote in Texas.

For how property coverage fits inside a BOP, see our guide to what a business owner’s policy covers. For lease questions, see our commercial lease insurance guide.

Covered causes of loss

Property policies cover different causes of loss (Texas Department of Insurance):

Basic form: listed causes such as fire, windstorm, hail and vandalism.
Broad form: the basic causes plus additional listed causes, such as some leaking appliances and structural collapse.
Special form: generally covers causes of loss except those the policy excludes or limits.

Special form doesn’t cover every loss. In one sample special form, exclusions include ordinance or law, earth movement, certain utility failures originating away from the premises, flood and other specified water, fungus, mechanical breakdown and wear and tear, and theft of some property types is limited (sample special causes-of-loss form, illustrative, ISO CP 10 30, 2017 edition).

Water damage isn’t all the same

In the sample special form, flood and surface water, water backing up from sewers or drains, and underground water are excluded. Long-term or repeated leakage may be excluded or limited, with the exact wording controlling. A sudden discharge, such as a burst pipe, is treated differently, subject to the form’s conditions and other exclusions (sample special causes-of-loss form, illustrative). Ask how your policy treats each source of water.

Wind and hail

Wind and hail may be covered causes of loss, often with their own deductible. Wind and hail may be excluded or insured separately in coastal areas. Check the actual policy (Texas Department of Insurance).

The Texas Windstorm Insurance Association (TWIA) provides wind and hail coverage only, as a residual insurer of last resort for property in its designated catastrophe area along the coast. Eligibility generally involves being denied coverage by a private insurer, applicable windstorm certification requirements, insurable condition and, for certain properties, proof of flood insurance. Not every Texas property needs TWIA or qualifies for it.

Valuation, limits and deductibles

Replacement cost vs. actual cash value. Replacement cost pays to repair or replace at current costs; actual cash value deducts depreciation (Texas Department of Insurance). Which applies depends on the policy. In the sample form, actual cash value applies unless the replacement cost option is selected (sample building and personal property form, illustrative).
Replacement cost conditions. Under the sample form’s replacement cost option, replacement cost generally isn’t paid until the property is actually repaired or replaced as soon as reasonably possible, and payment is limited to the least of the limit, the cost to replace with comparable material and quality, or the amount actually spent (sample building and personal property form, illustrative). Replacement cost doesn’t mean unlimited payment.
Insurance values. The policy’s valuation terms decide how a loss is valued. A market price, tax assessment or accounting book value isn’t automatically the right amount of insurance, and actual cash value isn’t necessarily the same as accounting depreciation. Ask how to set limits for each building and type of property.
Coinsurance. If your policy contains a coinsurance provision, a limit below the required percentage of the property’s value can reduce what’s paid. In the sample form, an agreed value option can suspend the coinsurance condition for a stated period (sample building and personal property form, illustrative).
Deductibles. A deductible is the amount you pay toward a covered loss (Texas Department of Insurance). Some policies use a percentage deductible for windstorm or hail. Ask what value the percentage applies to, whether it applies separately to buildings or property categories, and whether a minimum deductible applies. If the deductible is 2% of a $5 million insured value, the calculation is $100,000. The actual endorsement determines the basis and application.
Sublimits and location limits. Some property types and locations have smaller limits. Ask which apply.

Exposures that may need an endorsement, separate coverage or another policy

Depending on the insurance arrangement, these may need additional review. Not every item is a universal exclusion.

Flood. Most standard commercial property policies exclude flood. Ask whether flood coverage is available through a separate policy or another specifically provided arrangement. NFIP policies generally have a 30-day waiting period, with exceptions (FEMA). Private flood insurers may use different effective-date requirements. For more detail, see our guide to what commercial flood insurance covers.
Earthquake or earth movement. Excluded in the sample special form, with some exceptions for resulting fire or explosion (sample special causes-of-loss form, illustrative).
Equipment breakdown. TDI describes boiler and machinery coverage for equipment such as boilers, air conditioning units and compressors (Texas Department of Insurance). Ask whether your policy includes equipment breakdown coverage. For more detail, see our guide to what equipment breakdown insurance covers.
Ordinance or law. The sample special form excludes losses from enforcing building codes (sample special causes-of-loss form, illustrative). TDI describes optional coverage for extra construction costs required to meet current codes (Texas Department of Insurance).
Property in transit or used away from the premises. Extensions may be limited. Tools and equipment taken to job sites may need separate coverage.
Spoilage or temperature-sensitive stock. Ask whether and how spoilage is covered; this requires policy review.
Utility service interruptions. The sample special form excludes certain utility failures originating away from the premises (sample special causes-of-loss form, illustrative). Ask whether any utility services coverage applies.
Business income and extra expense. Lost income while you can’t operate normally, and extra costs to return to normal operations, require applicable coverage (Texas Department of Insurance). They may be included in a package rather than necessarily purchased separately. For more detail, see our guide to what business income insurance covers.
Cyber-related losses or electronic data. Electronic data coverage may be limited. Ask whether separate cyber coverage fits your business.

Three different questions:

Damage to your insured property is a property insurance question.
Liability for damage to someone else’s property is a liability insurance question.
Lost income and extra operating expenses are business income and extra expense questions.

How it fits together

Property or exposure	What may be covered	What to confirm
Building	If purchased, the building and items such as permanently installed equipment	Whether you or the landlord insures it; limit and valuation
Business personal property	Furniture, equipment, inventory and other covered contents	Limit, valuation and property not covered
Tenant improvements	The tenant’s insured interest in qualifying improvements, subject to the policy definition and lease	Lease terms and how your policy defines improvements
Property of others	Others’ property in your care, if applicable coverage and limits apply	Coverage and limits, and whether liability coverage is also needed
Property away from the premises, in vehicles or in transit	May have separate conditions and sublimits	Which extensions apply, or whether separate coverage is needed
Causes of loss	Basic, broad or special form	Exclusions and limitations
Water	Depends on the source of the water	Flood, sewer backup and long-term leakage treatment
Wind and hail	Often covered, possibly with a separate deductible; coastal areas may differ	Wind/hail deductible, and windstorm coverage if coastal
Flood	Most standard commercial property policies exclude it	A separate flood policy or other specific arrangement, and its effective date
Equipment breakdown, ordinance or law, utility services, spoilage	May require an endorsement or separate coverage	What your policy includes
Business income and extra expense	Lost income and extra costs after covered damage, if applicable coverage applies	Whether included, and its limits and conditions

(Texas Department of Insurance; sample property form; sample causes-of-loss form; TWIA; FEMA)

Three hypothetical examples

These examples are illustrations, not real clients. They show coverage questions, not claim outcomes, and don’t imply coverage is available for every property.

A tenant’s shop

Assumptions: A gift shop leases space, paid for built-in counters and keeps inventory on site. A sewer line backs up.
Questions: Does the lease make the tenant responsible for any building property? How does the policy define the tenant’s interest in the counters? Does the policy exclude water backup, and is coverage available by endorsement? Does the policy include business income?

An owner-occupied building

Assumptions: A business owns an older building on the Texas Gulf Coast and carries property coverage with a percentage wind/hail deductible.
Questions: Does the policy cover wind and hail, or is separate windstorm coverage needed? What does the percentage deductible amount to in dollars? Does the policy have a coinsurance provision, and is the limit adequate? Would ordinance or law coverage pay for code upgrades after a loss?

Tools taken to job sites

Assumptions: A contractor stores tools at a shop but carries them in trucks to job sites.
Questions: Does the property policy cover tools away from the premises or in vehicles, and with what limits? Is separate coverage for tools and equipment needed?

Questions to ask before you buy

Which buildings and property types are covered, and at which locations?
Is it basic, broad or special form, and what’s excluded?
Is property valued at replacement cost or actual cash value, and what conditions apply?
Is there a coinsurance provision or an agreed value option?
What are the deductibles, including any wind/hail percentage deductible?
What sublimits apply to property away from the premises, in transit, outdoors or electronic data?
Is flood coverage needed? Is the property in a coastal windstorm area?
Are equipment breakdown, ordinance or law, utility services, spoilage and business income included?
What does my lease require me to insure?

Talk through your needs

Melliand Insurance Agency is an independently operated insurance agency affiliated with Premier Group Insurance (PGI), a nationwide agency network. Availability of any coverage depends on your property and the insurer’s underwriting.

To discuss property coverage for your business, call (972) 346-4666 or email melliandinsurance@gmail.com. Hours are Monday–Friday, 8 AM–5 PM Central. There is no walk-in office. In-person visits are available by appointment at your home or business throughout the Dallas–Fort Worth area.