Commercial Property Insurance/Business Buildings Insurance

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What our Nerds say about commercial property insurance

RHIANNON

INSURANCE NERD

If you own your business premises, you may want to consider taking out commercial property insurance. Also known as business buildings insurance, this could cover the cost of repairs if your commercial property was damaged by fire, flooding, or burst pipes, for example.

Even though business buildings insurance isn’t a legal requirement, it may be worth considering as you can’t predict when a freak accident or unforeseen event could strike your business premises. Whether it’s a heavy storm that causes wind or flooding damage or an act of vandalism, buildings insurance can provide you with cover to make sure you don’t need to pay for all of the repairs yourself.

If you do own your business premises and want to insure your property, you can compare quotes here. If, however, you want to find out more about business buildings insurance before making a decision, you can read more below.

What is commercial property insurance?

Commercial property insurance, also called business buildings insurance, is one of the main types of business insurance. It is exactly the same as buildings cover for home insurance, just for commercial properties such as shops, cafés, pubs, warehouses, offices, and more.

This insurance will cover the cost of repairing damage to the building and overall structure of your property in the event of an incident such as fire, flooding, subsidence, vandalism, and other disasters.

It won’t cover any items in your premises that can be removed, such as furniture, equipment, curtains, blinds and carpets. These should be covered by business contents insurance.

When you insure your commercial property, you need to make sure the rebuild cost is covered, not its current market value. The rebuild cost is how much it would cost to rebuild your premises, taking into account the necessary materials and labour.

What does commercial property insurance cover?

Business buildings insurance can typically cover your commercial property if it’s damaged by certain incidents, such as:

  • storms
  • fire
  • flooding
  • escape of water, e.g. burst pipes
  • subsidence
  • riots or civil disturbance
  • malicious damage
  • theft

Some policies may also cover accidental damage.

Policies should cover the cost of repairing the damage, or rebuilding the property if it’s completely destroyed, as long as your claim meets the terms and conditions of your policy.

As well as the external structure of your business property, which may include garages and outbuildings, buildings insurance may cover damage to fixtures and fittings inside the property, such as:

  • flooring that is glued or nailed down
  • windows
  • built-in cupboards, built-in appliances and work surfaces
  • sinks and toilets
  • cables and underground pipes

What doesn’t commercial property insurance cover?

Business buildings insurance won’t cover every type of damage to your property. The exact list of what is and isn’t covered will vary between insurers, but many policies won’t provide cover in the event of the following:

  • Wear and tear: If parts of your building deteriorate and get worn away, you won’t be covered as you would expect this type of damage to happen over time.
  • Negligence: If you or your employees fail to take proper care of the property, such as not securing the building properly by leaving a door or window open. You may also not be covered if you try to carry out repairs that you’re not qualified to do, such as trying to fix an electrical or plumbing fault.
  • Acts of war or terrorism: Some policies may allow you to add this cover as an optional extra.

Many insurers may also stipulate that the commercial property cannot be unoccupied for a certain length of time. If it’s been empty for longer than the specified period – after 30 days is not unusual – you may have more limited cover, and possibly have to agree to extra security measures such as regular checks on the property or you may have to take out extra cover.

While business buildings insurance will cover the cost of repairs, it may not cover any financial loss you incur as a result of the damage. For example, if a fire means you can’t trade out of your premises for several months, you may not be compensated for the income you have lost. Check the terms of an insurance policy to see if this is covered. If not, you may want to consider business interruption insurance.

Do I need commercial property insurance?

If you don’t own the property your business uses, you don’t need to take out buildings insurance. This is the responsibility of your landlord.

For those who do own their premises, business buildings insurance is not required by law. However, many mortgage providers may only offer you a mortgage if you take out this cover. Make sure you check if this is the case for your business.

Even if you own your premises outright and technically don’t need to take out business buildings insurance, it may still be worth considering. You should think about what would happen if your premises were severely damaged and it meant you were unable to continue with your work as normal. Would you be able to pay for the repairs, as well as coping with the disruption it would cause to your business activities?

If you would find it difficult to afford the repairs, you may want to consider taking out business buildings insurance.

Whether you own your business premises or you’re a tenant, business contents insurance could be useful cover to have. This would cover any furniture, equipment, and other items in your business that aren’t part of the structure of the building.

How much does business building insurance cost?

The cost of business buildings, or commercial property, insurance depends on a number of factors, including:

  • where your business is located, such as if it’s in an area at risk of flooding
  • how many properties you want to cover
  • the size of the premises
  • what industry your business is in
  • the rebuild cost of the property
  • whether you add any extra cover to your policy

You can often take out a joint business buildings and contents insurance policy, rather than buying both these forms of cover separately.

» COMPARE: Business buildings insurance

Commercial Property Insurance FAQs

Is business buildings insurance a legal requirement?

Business buildings insurance isn’t a legal requirement. However, if you have a mortgage on your premises, the mortgage provider may require you to take out a buildings insurance policy.

The only type of business insurance that is a legal requirement is employers’ liability insurance.

Do I need business buildings insurance if I don’t have a mortgage?

If you don’t have a mortgage, and so are not required to have buildings insurance by any provider, there is technically no obligation to take out this cover.

However, it may still be worth considering. Buildings insurance could give you peace of mind that the insurer will cover the cost of repairing any damage to your property. Without any cover, you would need to pay for the full cost of any repairs.

Should I get business buildings insurance if I work from home?

If you run your business from home or simply work from home, you may be covered by a standard home buildings insurance policy. However, it will depend on your individual situation and the terms of the insurance policy, so don’t assume you would be covered. You should tell your insurer if you run your business from home.

If you store and use any business equipment in your house, you may also consider specific business contents insurance as it may not be covered by a standard home contents policy.

Who is responsible for buildings insurance on a commercial property?

The landlord of the commercial property is responsible for insuring the building. So, if your business owns the premises, insuring the property is your responsibility.

If you rent your premises, you don’t need to worry about buildings insurance as this should be sorted by the person who owns the property.

If you lease your premises, the lease agreement should state who is responsible for buildings insurance. It will typically be the landlord, who may pass on the cost of the insurance in your service charge.

Does commercial buildings insurance cover floods?

Business buildings insurance will typically cover any damage to your commercial property caused by flooding. However, you should check the terms of a policy to confirm this and watch out for any exclusions.

If you live in a high-flood-risk area, a standard business buildings insurance policy may not provide you with full cover for flooding. You may need to take out specialist flooding cover to be protected against this.

Can I get commercial property insurance if the property is unoccupied?

Business buildings insurance may cover your property for limited periods when it is unoccupied, but you would need to tell your insurer.

If your property will be empty for an extended period of time, your standard business buildings insurance may not be valid, or you may not have as much cover. However, there are specific buildings insurance policies that you could take out for an unoccupied commercial property.

What insurance does my business need?

No business is the same, so businesses will have different requirements when it comes to insurance. If you have any employees in the UK, your business will legally need employers’ liability insurance, with some exceptions. Some industry bodies may also require businesses, such as solicitors and accountants, to take out professional indemnity insurance to be able to operate in that sector. Beyond this, you can typically choose what insurance your business takes out. For example, you could choose from:

» COMPARE: Business insurance quotes

About the author

Rhiannon Philps
Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more
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