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14 May 2021
Jamie Gibbs Jamie Gibbs

Commercial property insurance explained

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A sign outside a building with 'office suites available' written on it

If you own a business, it's important to ensure you keep your premises safe. 

What is commercial property insurance? 

Commercial property insurance is a type of buildings insurance policy. It's designed for buildings that operate as a commercial premises. 

It covers the building itself from fire, theft and damage.  

 

What counts as a commercial property? 

A commercial property is any building that's designed with business in mind. 

This could be something relatively small like: 

  • A shop 

  • A café 

  • An escape room. 

It also covers larger commercial premises like: 

  • Shopping centres 

  • Industrial estates. 

 

What does commercial property insurance cover? 

Commercial property insurance covers the costs associated with repairing and rebuilding your property. 

If you need to work out the rebuild cost of your property, check out our advice on calculating your rebuild cost.

It covers the bricks and mortar as well as fixtures and fittings against: 

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What might not be covered? 

There are a few potential exclusions to commercial property insurance: 

  • Premises that are left unattended for more than 45 days 

  • Damage caused by pests 

  • Shoddy work. 

 

Do I have to get commercial property insurance? 

Not at all. There's no legal need to get commercial property insurance. 

Some commercial mortgage lenders may insist you get it as a part of getting the mortgage. 

You still might want to consider it, though. The cost of rebuilding your premises from scratch could be astronomical. 

I don't own the building I operate out of. Do I need to get commercial property insurance? 

You don't need to get cover for the building itself - that's your landlord's responsibility. Have a chat with them and check that the building is covered. 

 

Are the contents of the building covered as well?

Commercial property insurance only covers the structure and fittings - not the contents.

To cover your personal belongings in the building, you'd need commercial contents insurance.

And to cover any stock that might need replacing, you'd need stock insurance.

 

What's the difference between rebuild value and market value?

When you get a commercial property insurance quote, you'll be asked about the rebuild cost.

The rebuild cost is how much it would be to completely reconstruct the premises from the ground up.

This is usually lower than the market value. The market value is how much the property would likely sell for.

This includes other factors like:

  • Location

  • Local amenities

  • Potential for income.

 

What are commercial landlords responsible for?

Much of what the tenant or the landlord is responsible for is down to the specifics of the lease.

In some cases, the tenants handle all health and safety. In others, the landlord looks after the 'communal' areas.

These are the common areas of responsibility:

  • Gas and electricity safety - usually down to the tenant but check your lease.

  • Maintenance and repair - any problems with the safety of the structure is up to the landlord.

  • Asbestos - it's up to the landlord to manage any asbestos risk.

  • Fire safety - usually down to the landlord but check your lease.

READ MORE: Landlord responsibilities 

 

Can a landlord refuse to renew a commercial lease?

There are a few strict circumstances where landlords can refuse lease renewals:

  • Where the tenant is in breach of the lease conditions

  • Where the landlord wants to use the property for their own business

  • Where the landlord wants to develop the property.

 

How can I keep my insurance costs down?

Insurance companies work out prices based on risk. So, the greater the risk of damage, the higher your insurance costs could be.

Our home insurance expert, Jessica Willock, says,

"One thing you can do is lower the risk that something might happen to the property.

"Make sure the building's security is solid to reduce the risk of a break in. Installing smoke detectors and fire extinguishers could also reduce the risk of fire.

"And insulating the building's pipes could prevent burst pipes in the winter.

"The lower the risk of you making a claim, the greater your chances of not paying over the odds for your policy." 
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