Insuring commercial property can be complex.
Commercial buildings come in all shapes, sizes and material construction. They generally need specialised heating, lighting and ventilation systems and the flexibility to cater for a variety of businesses or tenants.

Commercial_Property_InsuranceInsurers will assess multiple factors when they are calculating premium costs. A commercial landlord or property owner will need to provide details such as:
  • Location and any risks such as flooding
  • Type of construction and materials
  • Fixtures and fittings
  • Security
  • Type of industry using the building
Underinsurance
One of the regular mistakes made when insuring commercial property is assessing the full rebuilding cost. When calculating the sum insured for building and contents, it can be easy to undervalue the full rebuilding and replacement costs. This will leave you with a shortfall if you need to claim for a total rebuild if the property is destroyed.

Often, commercial property insurers will work on a pro rata “condition of average clause”; for example, if you are claiming for a partial loss of 100k out of your insured value of buildings and contents of 200K and you are underinsured by 50% (the full rebuild value is 400K), you will only receive an amount minus the percentage you are underinsured (50% of 100K = 50K). This could have serious financial consequences when you come to make a claim.

Property owner’s liability
Commercial property owners will need property owner’s liability insurance to protect against claims from a third party due to an accident resulting in injury or damage to their property.
The amount of cover will be determined by the type of business and the risks involved.

Business interruption and loss of rent
Following the total loss of a commercial building through fire, flood or another event, it may take some time to rebuild or repair the property. During this time, you will be losing rental income and you may have to find alternative premises for your tenant.

The amount of insurance cover will depend on your type of property and how long rebuilding work is expected to take. Calculations will include time taken for clearance, planning permissions, rebuilding and replacement of fixtures and fittings. This will determine the indemnity period (12, 24 or 36 months).

Legal cover
This is usually offered as an add-on to your commercial property policy and covers your legal costs if you are involved in disputes for non-payment of rent, data protection or employment etc.

Insurance broker
An insurance broker will be able to help you assess your individual requirements and provide an accurate valuation to ensure your building is adequately covered.