Commercial property insurance covers the buildings and physical contents a business owns or occupies against risks such as fire, flood, escape of water, theft and storm. For an owner it protects the building itself; for a tenant it protects fit-out, stock and equipment. It is usually combined with business interruption cover, so that lost income during the recovery is protected alongside the physical damage, and the sum insured should reflect full rebuild cost, not market value.
Premises and their contents are among the largest assets most businesses hold, and a serious fire or flood can destroy both the property and the ability to trade. Commercial property insurance is the cover that puts the physical side back together.
What does commercial property insurance cover?
It covers the buildings, if you own or are responsible for them, and the contents, stock, plant and equipment inside, against insured perils such as fire, flood, escape of water, storm, impact and theft. Cover can be extended to tenants’ improvements, glass, and property in the open. It is typically written as part of a wider commercial policy alongside liability and business interruption.
Do I insure the building or just the contents?
It depends on your interest in the premises. An owner-occupier or landlord insures the building itself; a tenant usually insures their fit-out, stock, equipment and contents, while the landlord insures the structure. The lease sets out who is responsible for what, so it is worth checking to avoid either a gap or a double insurance.
How should the sum insured be set?
Buildings should be insured for their full reinstatement, or rebuild, cost, including demolition and professional fees, not their market value, and contents and stock for what it would cost to replace them. Underinsurance is common and costly, because the average clause can cut a claim in proportion to any shortfall. A reinstatement cost assessment is the reliable way to set the buildings figure.
Why combine it with business interruption?
The physical damage is only half the loss. A fire that closes premises for months causes lost income as well as repair costs, and business interruption insurance covers that income while the property is restored. The two are designed to work together, which is why they are usually written on the same policy.
Getting the cover right
Commercial property cover needs the right sums insured, the right split between landlord and tenant, and the right interaction with business interruption. A broker can build it to match the premises and the business. To review your commercial cover, get a quote or speak to the team.