Commercial property buildings insurance is designed to shield landlords from expenses connected with third-party liability claims and many damage-causing events.
Such damage might occur from unforeseen events like a fire or flooding, or sometimes intentional damage can be caused by tenants or malicious vandalism, especially if a building is left standing empty for a short time. Landlords that want to protect themselves financially from these types of incidents typically invest in commercial buildings insurance.
Having commercial buildings insurance means that expenses arising directly from damages will be covered, and the cost of repair or rebuild will not have to be paid out of pocket by the landlord or building owner. Even though having this kind of protection in place may seem sensible from a business perspective, it may be surprising to learn that there is no legal requirement to purchase building coverage.
While the law does not require a landlord to have commercial buildings insurance, most landlords will invest in a policy to shield them from unexpected loss or damages. Acquiring a policy is made even more appealing as the monthly payments for the coverage are often paid for by the property tenants.
A common practice is for landlords to obtain the commercial buildings policy and then pass on the costs to the building occupants, making them responsible for the premium payments as part of the lease agreement. Meaning that once coverage is acquired the landlord effectively pays nothing for the protection.
Regardless of the law, there are some occasions where a landlord may need to have a commercial buildings policy in place. For example, if the property is being purchased with a mortgage the lender will typically demand coverage to protect the asset. Or based on the location of the building some local authorities may require that insurance be provided.
What is commercial building insurance?
If certain types of damage are caused to business property, the cost of repairs will be covered by a commercial buildings insurance policy. This coverage is designed to insure landlords against loss or damages from many naturally occurring or man-made events. Several things can go wrong in any building; burst pipes causing flooding, problems with electrical circuits leading to fire, and other eventualities can all cause damage to a property that is expensive to repair.
Commercial property building insurance is designed to cover the cost of repair, loss, or rebuilding that can be caused by things such as:
- Water leaks
- Malicious damage
- Storm & Wind damage
Commercial building insurance will prevent landlords from having to pay money out of pocket and help minimise disruption to the business.
Buildings insurance only protects the building. For items like office or computer equipment, a contents policy will need to be added. Average monthly premiums for buildings insurance will vary depending on coverage amounts, cost of a rebuild, age of the building, and many other factors.
Depending on the risk level assessed, the monthly premium will rise or fall accordingly. The size and type of business can increase payments, with higher-risk businesses requiring larger premiums. Each insurer will assess multiple different factors to arrive at appropriate coverage limits but there are some general averages that commercial landlords can expect to pay.
For example, a small business providing office services can expect to pay as little as £200 annually for their commercial buildings insurance policy, while a gardening business could easily cost 50% more per year. Prices can vary between different insurers based on their risk assessment and calculations.
Unoccupied buildings can be protected under a commercial policy, however, the premiums tend to cost substantially more. This is because any issue, such as flooding or electrical problems, can remain undiscovered for long periods leading to additional damage, therefore premiums are higher.
How to insure a commercial building
As the cost of building repairs can accumulate quickly it is important to ensure that commercial policy limits are high enough to cover any potential claims. Business owners may need to seek professional advice to make sure that coverage is enough to protect them from all possible incidents.
For many commercial landlords, policies and limits are reassessed each year to determine that the previous year’s limits are still adequate. As building occupants change, the requirements of each may be different and it is important to update commercial buildings insurance accordingly to keep coverage intact.
To obtain commercial property building insurance it is always best to shop around to find the best value. As prices can vary dramatically between insurers, it is worth using a comparison service like the one offered via NimbleFins or Simply Business to input information and compare multiple quotes side by side from different insurance companies to get the best deal.