A guide to commercial property insurance

Business insurance works in a similar way to personal insurance. That is to say, it protects your business against the financial cost of any theft or damage to your business’s property, or against legal claims made against you or your employees.

Just as with personal insurance, there are a number of different things you can insure against. 

Commercial property insurance is one type of insurance that’s taken out by property owners who either work from or rent their premises to third parties for commercial purposes (for instance, to run a business).

What is commercial property insurance and do you need it?

If you are a landlord of a commercial property, you should consider commercial property insurance. That’s because commercial property insurance not only insures you against the cost of damage to your property, it also protects you from having to pay out under other circumstances too.

These include liability for any injuries or accidents that occur on your property, or for what is called ‘loss of rent’ insurance, which covers periods when you are unable to let your building out.

What is a commercial building?

A commercial building is any building that’s used for business purposes rather than for people to live in. In the UK, different laws apply to a commercial property than to a residential building, and so the type of insurance required for each is different.

Who is responsible for commercial building insurance?

In most situations, your building’s landlord (that might be you or someone else) will be responsible for paying the building insurance. However, always make sure to check the lease if you are a tenant.

What is covered by commercial building insurance?

Commercial building insurance, also known as commercial property owner insurance, covers a range of events that could incur a financial loss for your business. However, what is covered and up to what value varies from policy to policy, so make sure you get a full list from your insurer.

Among the things typically covered by commercial building insurance are: 

• Damage from theft, fire, burst pipes or accidents
• Subsidence
• Business interruption
• Loss of stock or cash on the premises
• Legal costs.

Is loss of rent insurance included in commercial property cover?

Most business building insurance policies do include cover for loss of rent. However, this tends to only apply to any rental income lost through what is known as an ‘insurable event’.

What this means is that your insurer will pay out if you can’t rent out your commercial property because something has happened to it to make it impossible to rent. If you lose out on rental income simply because you cannot find a business tenant, then you are unlikely to be able to make an insurance claim.

Will the contents of the building be covered by property owner insurance?

This is where the difference between commercial building insurance and contents insurance comes in. A property owner only really needs to have a building insurance policy to cover most major unexpected costs associated with owning a commercial premises. The contents of the building however are covered by contents insurance.

You may sometimes be able to combine property insurance and contents insurance on one policy. However, it may not make sense to do so if you are a commercial landlord but do not run the business that operates from your property.

What are commercial property tenant rights?

Commercial property tenants have certain rights that all landlords should be aware of.

Although a commercial tenant tends to have fewer rights than a residential tenant, if you are a landlord then it is important that you know what these are.

Most tenant rights for commercial premises are detailed in the Landlord and Tenant Act 1954. The most important of these is that tenants have something called ‘security of tenure’, meaning that they have the right to remain in the property until they are served notice. Furthermore, notice that the landlord wants to end a tenancy must be given at least six months before the end, and must give the tenant reason for not continuing with the tenancy. 

What does the average annual building insurance cost?

The average cost of building insurance for commercial premises can vary greatly and depends on a number of factors. These include the size and location of the property, what businesses occupy it, and what type of cover is required.

Another key consideration for most building insurance quotes is the estimated rebuild cost of your property. The annual cost of insurance will be higher for a more expensive building.

Do you need to take out commercial building insurance if you’re renting the property?

Businesses renting a commercial building do not need to take out building insurance. Some small businesses may want to have a contents insurance policy to cover theft or damage to their stock or equipment, but insurance of the building itself remains the responsibility of the landlord.

The property owner (not the tenant) is also responsible for public liability insurance, which protects against legal claims made by third parties, for example, if they have an accident on the premises. In this instance, third parties who could make a claim include visitors and contractors working at the property as well the tenants who are renting it.

How to get the right business premises insurance with Bionic

With so many different insurance products available, navigating towards the right policy for your business can seem like an impossible task.

Luckily, Bionic knows the market as well as anyone. Our team will talk you through the process of getting commercial property insurance and help you find the best deal on your insurance, so your peace of mind comes at the right price.