Understanding Commercial Property Insurance

With so many types of insurance available, knowing the ins and outs of each can get confusing. At Alan & Thomas, we have a team of dedicated insurance brokers there to offer professional guidance. We stay on top of the latest industry regulations and news to provide expert advice to our clients. So, what is a commercial property insurance policy and who does it relate to? Read our guide to commercial property insurance below.

What Is Commercial Property Insurance?

Commercial property insurance protects property owners and landlords who lease to commercial occupants. This type of commercial insurance policy is important due to the variety of costly incidents. These can stem from allowing another party to occupy your commercial premises. A commercial building can range anywhere from industrial units to offices, barns or steel structures. Depending on the type of business occupant you let to, the risks can be considerable. 

To qualify for a commercial property insurance policy, first a contract needs to be made. The property owner must have a formal rental or lease agreement in place with their tenant. They should establish themselves as the landlord and the occupying business as the tenant.

What am I covered for?

A commercial property insurance policy covers you from risks that may arise with the property that you own, such as:

Liability for injury or damage

This covers the event of property damage or personal injury occurring due to landlord negligence in maintaining the property. The policy will provide costs towards defending or settling a claim made against the landlord. 

Necessary repairs

Commercial property insurance covers repair costs for damage to  a building or property. This relates to if the premises are damaged and need repairing or rebuilding.

Loss of rent

If a property becomes unfit to let due to an insurable event, the loss of rent can be recovered. For example, if there was damage from a fire, a section of your commercial property insurance policy can help to retrieve the costs from the loss of rent.

Damage to a landlords contents

Landlords will often own some of the contents inside the buildings they let out. This could be a fitted kitchen, flooring or even racking in warehouses. Commercial property insurance will provide cover for such items if they get damaged. This only applies if your lease agreement states that you are responsible for insuring these items.

The above is not a complete list of everything a commercial property insurance policy can cover. It's important to note that there are further scenarios that can happen. These may not be ordinarily included in a standard policy. These options might include cover for intentional property damage committed by a tenant or legal fees. 

Insurance terms to be aware of…

Policyholders need to understand all aspects of their commercial property insurance. Certain scenarios will trigger additional conditions or requirements, such as: 

Unoccupied properties

Unoccupied properties have a higher risk of break-ins and vandalism among other crimes. Because of this, most insurers will not cover unoccupied properties under this type of insurance. There is usually a grace period that can vary from one insurer to the next. But is often 30 days between when a property becomes vacant and when the owner has to switch to a vacant property insurance policy. Always notify the insurer or your broker when the property becomes vacant or is re-let.

Wear and tear

As a landlord, you should be maintaining the property on a regular basis. These maintenance costs are not covered by commercial property insurance policy. Policyholders should take the time to understand exactly what types of damage their insurance covers. As well as this, find out what constitutes as general wear and tear.

Flat roof warranty

Flat roofs are considered to be a higher risk than pitched roofs. This is because they are prone to leaks resulting in property damage. If a property’s roof has flat sections, insurers may require owners to perform certain servicing and repairs regularly. This will be as part of the agreed contract of insurance. 

Domestic VS Commercial – What is the difference?

Property owners must understand the differences between domestic landlord and commercial property insurance. The two main factors that distinguish the two include:

  • Tenant types

Domestic tenants refer to home leaseholders whereas commercial tenants relate to business leaseholders. An insurance policy should be relative to the potential risk that a landlord’s tenants may pose. For example, a domestic tenant generally tends to be of lower risk than a commercial tenant. This is due to it being less likely that they will be using industrial equipment or handling hazardous substances.

  • Building types

Commercial properties may come with a wider variety of building materials or infrastructures. These include steel frames, cladding or complex wiring systems which pose increased hazards. In the event of a claim, there is potentially more chance of greater costs.

In Conclusion

Letting out property to third parties comes with risks, just like everything else in life. Being a landlord can be profitable and rewarding but also has its downsides. There are a wide range of things that may not go to plan and could become costly. A commercial property insurance policy is a great way of transferring the risk of specific financial blows. It takes the pressure away from yourself and onto an insurer. 

The property insurance market is a constant changing world at the moment. Some insurers are finding themselves on the receiving end of substantial property claims. You can read our recent property insurance update to learn what other factors are making property insurers take a different view.

Qualified risk management brokers

At Alan & Thomas, we work hard to find you the right commercial insurance policy for your budget and requirements. As risk management brokers, a key component of what we do to help is managing the risks you face as a property owner. We'd love to hear from you and are more than happy to talk through your commercial property insurance requirements as a landlord.

We offer an extensive range of private client and commercial insurance covers. Whether you need marine trade insurance, heritage building insurance, or even leisure insurance, talk to us. To contact us and speak to an advisor, call 01202 754 900. You can also email info@alan-thomas.co.uk with any enquiries you may have.

Have a question?

If you would like to talk to one of our team about your commercial property insurance arrangements, either complete the form below or give us a call on 01202 754900. 

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