Commercial property insurance

What commercial property insurance can cover

A policy can protect a shop, office, warehouse, industrial unit or mixed-use investment against specified physical damage. Depending on the wording and options, cover may include the building, landlord contents, property-owner liability, loss of rent, alternative premises or legal expenses.

Cover is not automatic for every cause of damage. Flood, subsidence, terrorism, escape of water, malicious damage, glass, plant and machinery can be included, restricted, optional or subject to a separate excess.

Start with the lease and ownership

The lease should help identify who insures the building, how the premium is recovered and which repairs or improvements belong to landlord or tenant. Confirm the insured party and any lender or freeholder interest. Mixed residential and commercial use needs to be disclosed accurately.

Information the insurer is likely to need

• address, age, construction, roof and listed-building status;
• rebuild valuation, floor area and professional valuation date;
• the occupier’s trade and any hazardous process or storage;
• fire protection, alarms, security and electrical inspection arrangements;
• flood, subsidence, escape-of-water and claims history;
• unoccupancy, renovation and property-management arrangements.

Rebuild value is not market value

The sum insured normally needs to reflect the cost of reinstating the building, including appropriate demolition, professional fees and compliance costs, rather than its sale price. An inadequate figure can reduce a claim. Consider a suitably qualified rebuild-cost assessment for a valuable, unusual or complex property.

Unoccupied and changing premises

Policies often impose additional conditions or reduce cover when premises are empty for longer than the stated period. Tell the insurer promptly about a void, tenant change, new trade, major work or other material change and follow any inspection, heating, drainage or security requirements.

Compare the whole contract

Check sums insured, indemnity periods, excesses, average or underinsurance clauses, warranties, security conditions, exclusions and the claims process. Confirm whether loss of rent lasts long enough for a serious rebuild and whether service charges or other income are included.

This page is general information, not insurance, valuation or legal advice. Read our commercial disclosure.