Commercial property insurance

If you own a commercially used building (whether you use it yourself or rent it out), you should consider taking out commercial property insurance. Find out what's included below.

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What is commercial property insurance?

Commercial property insurance, also known as commercial landlord insurance, covers you if you own a building that is used for commercial purposes (like shops or offices).

This cover can also sometimes be known as commercial buildings insurance, though it usually also covers you for liability and not just damage to the building itself.

Do I need commercial property insurance?

Having commercial property insurance cover in place is not a legal requirement. However, if you own a building used as business premises, whether you run it yourself or lease it out, it is highly recommended.

Commercial property insurance protects your property against a range of insured incidents, such as flood and fire damage. It can also protect you against legal action and loss-of-rent.

What does commercial property insurance cover?

Cover will vary by insurer, but commercial property insurance usually includes the following elements:

  • Property owners’ liability insurance. This is equivalent to public liability insurance. It covers you in case a tenant or member of the public is injured or their property is damaged as a result of negligence relating to the property you are responsible for. You may also be liable for harm sustained through no fault of your own, so having this cover in place is a good idea.
  • Commercial buildings insurance. This cover pays out in case your building is damaged by an insured event, which usually includes things like flood, fire or theft. It helps pay for rebuilding costs and can also cover loss-of-rent. Note that only the fabric of the building will be covered – the interiors will require business contents cover.
  • Loss-of-rent. If your building becomes uninhabitable due to an insured event, this type of cover can protect you from losing out on rent or if you need to cover the cost of alternative premises for your tenant. The policy will usually reimburse you for the amount you would have earned from your tenants during the interruption period.
  • Landlord’s property. If you own some of the interior contents within the building, you might want to take out landlord’s property cover. This will protect your items against a number of insured incidents, which usually include damage by flood, storm, fire and theft, as well as damage caused by the tenants or their customers.
  • Employer’s liability insurance. If you run the business that sits within your building yourself and employ staff, you are legally required to take out employer’s liability cover.

Many insurance companies offer the option to cover just one building or include your entire portfolio under a single policy.

What can I add to my policy?

Different providers will offer different options. You might be able to add legal expenses to your cover and extend the cover offered for unoccupied buildings beyond the 30 days that are often included as standard.

Some companies might also offer cover for non-standard, residential and mixed-use buildings for additional premiums or through separate policies.

Common claims examples

  • Injury to tenant. Owning a building, particularly an older one, can be time-consuming. This is especially true if you own multiple premises. It’s possible that you don’t always find the time to immediately fix every issue that comes up. If, for example, the tenants complain of faulty floorboards in the property and someone trips and injures themselves before you’ve had a chance to fix the issue, you could be taken to court. Having property owners’ liability insurance can help cover the costs of legal fees and any compensation payments you might have to pay.
  • Fire damage. It’s a scary thought, but fires can and do sometimes happen. If a fire consumes your building, a commercial buildings insurance policy can help pay for rebuilding costs to fix the damage. Note that, depending on the policy, the building’s fixtures and fittings may not be covered, so check with your insurer if you have any doubt. Unless you get a combined commercial buildings and contents insurance policy, the items inside the building are also likely to be excluded.

What happens if I sell my building and insurance is no longer required?

Many insurers would be willing to refund unused premiums. So, if you’ve paid in advance for the year and have a few months left on your policy, you might be offered a refund for the remaining months. If you pay by direct debit, you might be able to cancel the rest of your payments.

Note that the insurance company is under no obligation to refund you and may charge a cancellation fee if you cancel your policy before it expires.

If you’ve made a claim on your policy, you are unlikely to be given a refund and may have to continue paying your monthly instalments for the remainder of the policy term.

There’s a flat above my property, is it insured on my policy?

If your policy includes buildings cover, then the structure of the flat would be covered. This would usually include property owner’s liability, so slips and falls related to any part of the building can be covered.

The contents of the flat will not be covered (this would usually include fixtures and fittings), so the tenants will need to arrange their own contents cover for their items.

Can you cover annual rental income and for how long?

Some insured events can cause severe damage to your building. For example, it can be consumed by fire or badly damaged in a storm. If this happens, you may suffer a loss of rental income until the property has been fully repaired. Depending on the location, type and construction of the property, this can take a long time.

Most insurers will allow you to set your own time limit for your loss-of-rent cover, so consider the requirements of your building (particularly if it’s listed or requires specialist construction) and make sure you give yourself ample time to make all the necessary repairs without losing out on precious income.

Can you cover unoccupied properties?

Most insurers can cover unoccupied properties for up to 30 days for insured incidents. This usually includes things like fire, storm damage and earthquakes. That said, don’t assume this cover is included – always check the policy details.

If you need cover for a period longer than 30 days, talk to your insurer. It may not offer this, but might be able to point you in the right direction.

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