Commercial property insurance

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    Chris Godfrey

    Page written by Chris Godfrey. Last reviewed on May 26, 2024. Next review due April 6, 2025.

    Commercial properties are typically the biggest assets any business has, but just like private residences, they can be damaged or destroyed through many different causes, creating the potential for a repair or replacement bill big enough to sink the business.

    Fortunately, there’s an answer to this dilemma. Available to all businesses and to cover almost any eventuality, comprehensive commercial property insurance is a valuable emergency lifeline. Use it to offset risk, to create a financial cushion, and to avoid the potential for disaster should the roof fall in.

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      What is commercial property insurance?

      Any building that is occupied by a business is classed as commercial property. Shops, offices, pubs, salons, restaurants, showrooms, cinemas, and clinics are examples of commercial property. 

      Commercial property insurance is a type of business insurance designed to protect the owners of commercial buildings from a financial loss resulting from damage to or the total destruction of the property and/or whatever was inside.

      Do I need commercial property insurance?

      Commercial properties and their contents can be expensive to replace or repair. Unfortunately, mishaps usually come without warning, giving property owners no time to react and leaving the uninsured facing a large bill that can hurt their profitability or even put them out of business. 

      What can go wrong? Many things. For example:

      • A fire damages part of your shop, destroying retail equipment and unsold stock. You will need to replace these items and make repairs to fix the fire, smoke and water damage.
      • Thieves attempt to break into your car showroom, damaging costly roll-up doors and destroying CCTV cameras and alarms. 
      • Severe storms tear away part of your restaurant’s roof, making it unfit for business and allowing the elements to soak the interior.
      • A delivery vehicle collides with your perimeter fencing, creating a hazard to the public and impacting your property’s security.

      Commercial property insurance can’t stop these sort of problems from happening, but it can make the aftermath easier and cheaper to cope with.

      What's included in your commercial property cover?

      Commercial property insurance comes in two main categories:

      Building Insurance protects the bricks and mortar fabric of the building and compensates the owner from financial loss in the event of:

      • Fire
      • Flood and burst pipes
      • Storm damage
      • Theft
      • Riot damage
      • Vandalism
      • Subsidence

      Business Contents Insurance covers the insured for the loss, damage, and theft of the property’s contents including stock and inventory.

      Top tip: If you’re a landlord, contents cover will be your tenant’s responsibility. However, depending on the lease/rent agreement you may have supplied furniture or appliances that belong to you. In which case, Landlord’s Commercial Insurance can be used to protect your provided contents from loss, damage or theft caused by the tenant or a third party.

      What's not covered by commercial property insurance?

      Your policy will define exactly what is and isn’t covered, but most commercial property insurances won’t protect you for:

      • Normal wear and tear

      Generally, insurance providers won’t pay for repairs or replacement items if the damage or loss was caused by normal usage, or because of poor maintenance.

      • Unoccupied properties

      Vacant properties present higher risk of theft, damage, and deliberate fires. As a result, most insurers will cancel your policy if the property is left empty for a certain length of time – usually more than 30 days. If you can foresee that your property will be vacant for longer than this, you should consider buying Unoccupied Commercial Property Insurance.

      • Poor craftmanship

      Most insurers will not pay out for damage or total loss caused by inferior repairs or poor craftmanship. 

      • Pest and animal damage

      Commercial property insurers typically do not cover damage or loss caused by animals and vermin such as rats and insects. This also includes domestic pets, so if you like taking your furry friends to work, you should seek specialist cover to protect against any damage they may cause.

      How much commercial property insurance will I need?

      You need sufficient commercial property insurance to restore your buildings and contents to the state they were in before the damage or loss occurred. This means you should request a policy limit – the maximum sum that the insurer will pay out – to cover the cost of the worst-case scenario: Meaning the demolition and rebuilding of the property and replacing everything inside. If you are not sure what this value would be, you could employ a professional valuer to provide an estimate of total replacement cost.

      Top tip: Don’t forget the hidden expenses incurred in any rebuild, it isn’t only demolition and construction costs you will face. Surveyors, legal and other professional fees, plus permits and local council inspection costs must be factored in.

      When should I get commercial property insurance?

      You should obtain commercial property insurance as soon as you exchange purchase contracts on the property. Unseen events that damage or destroy the property can occur at any time, so it is recommended that you get cover immediately and do not wait until you physically occupy the building or start trading from the premises.

      Top tip: If you do not intend to occupy the building within 30 days of taking out your insurance, you must tell your insurer.

      What other business insurance do I need?

      As well as insurance to protect the fabric of the building, you should also consider:

      Commercial contents insurance

      This type of policy covers whatever is kept inside the building from damage, loss or theft. This includes stock, inventory, fixtures and fittings, furniture and equipment. If you are renting the building out, contents cover will be the sole responsibility of the tenant, unless you have included some items and equipment as part of the lease agreement. In which case, you should take out Landlord’s Commercial Insurance to cover your provided contents.

      Accidental Damage Cover

      This is additional cover to protect you from financial loss in the event that a tenant or visitor accidentally damages your commercial building or its contents. For example, a tenant overloads the electrical system, shorting out the fuse box and damaging your security equipment. Accidental damage insurance covers any gaps in your main building insurance policy.

      Liability Insurance

      Commercial property owner’s Liability Insurance is a type of landlord insurance that covers compensation costs should a tenant, visitor, or member of staff be injured while they’re on your property, or if their personal property is damaged whilst they are in the building. If you have employees, you must also have Employer’s Liability Insurance by law. 

      How much does commercial property insurance cost?

      Premiums for commercial property insurance can be less than £10 per month, but just as no two UK commercial properties are alike, so no two commercial property insurances are the same. Costs will depend on your building type, location, and the risks attached to what you do or sell, making every quote unique. 

      How Swoop can help

      Owning any property involves risk, but that doesn’t mean you have to suffer the consequences if things go wrong. Don’t let a mishap turn into a disaster. Contact Swoop today to discuss all your commercial property insurance needs. 

      Written by

      Chris Godfrey

      Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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