If you rent your commercial premises, the first thing to do when considering commercial property insurance is to see where responsibility lies between the landlord and the tenant in the lease. It may be that the insurance of the structure falls to the landlord, in which case the fixtures and fittings will still be the responsibility of the tenant. If the premises include a shop with a display window, tenants should be particularly careful to check the lease for details of who is responsible for insuring the plate glass.

What should commercial property insurance cover?

Standard policies should cover the following risks:

• Accidental damage – Accidental damage to the property by you or anyone in your business.
• Malicious damage – This category of damage relates to the deliberate or intentional damage to the property caused by a third person
• Fire
• Flood – Floods can be devastating to stock and business systems, and it can cost thousands to put the property back into its original state.
• Storm – Damage to roofs by falling trees in high winds would be covered here.
• Explosion – Check policies carefully for terrorism exclusions.
• Riot – Civil disobedience will be more of an issue in urban centres than rural areas, so the location of the property will affect the premium.

There may be other heads of claim included, depending on where the property is and what it is being used for.

Commercial property insurance does not cover wear and tear.

What will the insurance provider need to know?

Insurance providers will need a valuation of the property, to assess the level of cover required. The valuer, who would usually be a surveyor, will assess the market and reinstatement values of the property.

What will the policy say?

• Conditions – Commercial property cover will contain conditions about how you use and maintain the property. For example, the policy might prohibit the property from being left vacant for more than 30 days continuously. Also, the policy might insist that it is only valid as long as current fire regulations relating to that kind of property have been met. Further, the insurer may require you to seek their consent for alterations, as they may alter the cost of the premium.
• Warranties – Generally, warranties will be statements that the conditions are being complied with.
• Excesses – An excess is the level of claims the insurance provider sets, below which they will not pay out. The insured is supposed to sort out minor damage below this value himself. Excesses may vary depending on the head of claim.

Other interests
If the property is mortgaged, you need to check the requirements of your mortgagee for commercial property insurance. They may require the policy to be in joint names, or have their interest noted.

Tags | Commercial property insurance