Do I need commercial building insurance?
There seems to be an insurance policy for everything these days, and it can be hard to determine whether it’s necessary or not. Some policies, such as employer’s liability insurance, are a legal requirement, therefore making the decision for you.
On the other hand, we have some that aren’t required by law but are seen as a priority for the smooth running of a business, property, or vehicle. Commercial building insurance falls into that category.
It isn’t a legal requirement, so many property owners ask themselves whether they even need commercial property insurance. But as with many things, the answer is not an easy yes or no; it will depend on a variety of factors, both inside and outside of the property owner’s control.
And that’s precisely what we’ll discuss in this article. We’ll examine whether you need commercial building insurance, how much it can cost, what to look for in a good policy, and much more.
Do I need commercial building insurance?
Unless you are able to front the cost of repairs and rebuilds of your property out of pocket, commercial building insurance may be a priority. Taking out a commercial building insurance policy is not a legal requirement. Still, as a commercial property owner, it would be in your best interests to be covered under such a policy. This is because all buildings are at risk of or risk of causing damage. Should an incident occur without protection, you could be facing a hefty bill.
The costs of repairing something small such as a chipped window, can be in the hundreds. To be in a situation where there is significant damage to your property or worst-case scenario, your whole property gets damaged and you need to rebuild it from scratch, it can cost in the millions. Commercial property insurance ensures the responsibility for the costs will be borne by the insurance provider, not you.
What is commercial building insurance?
Commercial building insurance, also known as business buildings insurance, or commercial property insurance, is an insurance policy that safeguards the building and its surrounding premises from damage. Most businesses have a brick and mortar location where they operate. This could be in the form of an office, a shop, a restaurant, a warehouse, etc. The building can sustain damages that require repairs, replacements, or rebuilds, such as leaks, theft, etc., and commercial building insurance covers these costs to ensure you don’t have to foot the bill yourself.
How much will commercial building insurance cost?
The cost of your policy will depend on the level of coverage you need, and the level of coverage you need will depend on various factors. The first factor is the building’s location. If the building is in an area that’s prone to flooding or heavy storms, it poses a greater risk for insurers. As such, your premiums will be higher. The same goes for a property in an area with a high crime rate for theft, burglaries, or arson. Therefore the location of the building will play a significant role in the cost of the policy.
The second factor is the building itself. Older buildings are at more risk of damage, especially if they have not been well maintained, and will therefore hike up the cost of your policy. The level of security and preventative measures that are currently in place will also impact the price, as well as how much the insurer would have to shell out for rebuilding the whole property.
The third factor is the business that is operating within the building. Larger enterprises in specific industries will be at greater risk of causing damage to the property than smaller businesses in other industries. This will result in the larger business having to pay a higher premium than its smaller counterpart.
These are the three main factors that will determine the commercial property cover cost. It should be noted that different insurance providers often use different criteria when determining the cost of a policy. As such, it’s best to ask an insurance provider directly for a quote or ask an insurance broker to find the best deals for you.
How can I reduce the cost of commercial building insurance?
The first step you can take to reduce your premiums is to pay annually. Paying upfront for the year can often save you quite a bit of money. Secondly, it’s a good idea to have a history of professional servicing that you can show insurance providers. This conveys the message that you are staying on top of maintaining the property and are actively looking to catch problems early, which will reduce the risk for insurers.
Additionally, taking all measures to prevent incidents from happening will also reduce your premiums. This could be installing top of the line alarm systems or installing fire-resistant materials throughout the building. If you have taken these steps and are looking to reduce the cost of your policy even more, you can opt to increase your excess. While this will put more financial responsibility on you, it can drastically lower your premiums. Finally, you can simply ask the insurance provider or broker how to reduce your premiums. Often, they can provide you with specific information related to your building that you can fix or change to pay less.
What’s covered by commercial buildings insurance?
Commercial building insurance ensures that the property is protected from all costs related to damages. This means that you’ll never have to pay for replacing or repairing damage to the building itself, items that are fixed to it, and the surrounding land. Most commercial buildings insurance policy’s will at least cover you for the following:
Vandalism
This could be in the form of theft, arson, rioting, or burglary; the costs of repairs in these instances will be covered under your policy.
Natural disasters
If the building is in a location that’s susceptible to floods, storms, fires, or even subsidence, the building could be at risk of excessive damage. These repair costs would be covered under your policy.
Accidental damage
There is one caveat with this; it cannot be due to negligence. Damage to due negligence won’t be covered, but other accidental damages will be covered.
Finding the source of damage
Costs associated with locating and finding the source of damage to drains, cables, pipes, or sources of leaks will be covered.
Prevention
Necessary costs related to protecting and safeguarding your property from immediate damage will be covered.
Surrounding land
You may find that there has been a leak or some other form of damage on the business premises which has affected surrounding trees and plants or has damaged gates, fences, walls, etc. Costs to repair or replace them will be covered.
Clearing of debris
If an event creates debris on your property or premises, costs associated with clearing this will be covered as well.
Most commercial building insurance policies will cover you in case any of the above occur. But as with all policies, the exact coverage will vary depending on the insurance provider. It should be noted that by default, the contents inside your property will not be insured; you may have to add it on or take out a separate policy for contents cover.
What’s not covered by commercial building insurance?
Unfortunately, not all kinds of damage are covered under a commercial building insurance policy. Typically exclusions include:
Contents
Insurance for commercial buildings cover the structure and fittings of the building, as well as the surrounding area. However, it will not cover the possessions and contents inside the building. Therefore, you will need to take out a separate contents insurance policy if you want any machinery, furniture, computers, goods, personal items, etc., within the building to be covered.
Wear and tear
Whether it’s damage from poor maintenance or general wear and tear, insurance providers won’t cover the costs of repairing or replacing these.
Poor handiwork
It can be tempting to hire cheap handymen for a quick fix, but this can be a bad idea for two reasons. Firstly, it will not be covered under your insurance policy, and you’ll have to pay for it out of pocket. Secondly, any subsequent repairs or replacements that need to be made due to poor workmanship will be invalid from claims, meaning it could cost you much more in the long run. That’s why it’s always best to go with a professional and qualified handyman for all repairs and fixes to your building.
Negligence
It’s crucial that commercial property owners, business owners, and employees are aware of the correct safety measures and procedures when on the building premises. Damages due to negligence or carelessness will not be covered under commercial building insurance. An example of this is if doors have been left unlocked or improperly closed and theft occurs without using force to enter the building.
Unoccupancy
Most commercial property insurance cover will not protect you if the property has been unoccupied for more than 30 days. This is regardless of the reason why it’s empty, whether it’s in-between tenants or vacant due to making repairs and refurbishments. This is because an empty building is more at risk of squatting, vandalism, and burglary. In addition, if there are any leaks or floods in the building, it won’t get noticed until perhaps a few days or even weeks later. This will considerably increase the amount of damage caused and, as such, costs to repair the damage. In order to get coverage for unnocupancy as well, you will need a specialist unoccupied property insurance policy.
What should I look for in a policy?
The exact coverage you have will vary on your policy and policy provider. Therefore, if you’re currently acquiring commercial buildings insurance quotes, there are a few desirable perks that you should be keeping an eye out for:
Emergency helpline
Unfortunately, not all forms of damage will happen during business hours, particularly when it comes to vandalism. But even natural disasters, it can occur at any time. Therefore, having an emergency helpline you can call at all hours of the day is immensely helpful. You certainly don’t want to find out about a problem during the night and then have to wait until 9 am the next day when the insurance helpline opens.
Legal and tax advice helpline
Commercial building insurance is an allowance expense and therefore tax-deductible, meaning you will be able to reduce your tax bill and protect your property at the same time. Whilst all legal and tax advice should be provided by your legal team and accountants, it’s incredibly convenient to have a helpline you can call for information should you need it.
Low excess
This should be a given, but it’s an often overlooked aspect of taking out an insurance policy. Your excess is the amount you will have to pay before the insurer begins to cover costs. For instance, if your excess is £1,000, repair costs up to that amount will have to be paid by you first. The insurance provider will then cover anything above that amount.
Although you want to lower your monthly or annual premiums as much as possible, you don’t want to have the difference to be reflected in your excess. So ensure your excess is affordable for your financial circumstances.
What if I run a business from home?
Typically, home insurance does not cover a business that operates from a residential home. In the off-chance it does, there will be many restrictions as to what is and is not covered. In such a scenario, it may be best to take out a home workers’ insurance policy so that you’re fully covered as a resident and as a business working from home.
Final thoughts
Commercial buildings insurance certainly isn’t a legal requirement. But, if you’re a property owner that is renting the building to tenants or is simply operating your own business out of it, commercial building insurance may be something you want to take out.
Unless you are financially capable of funding all repairs and replacements to the building, as well as a complete rebuild of the property, commercial property insurance will be seen as a necessity. It’s a small price to pay in the event that something goes terribly wrong.
