Why do I need Commercial property insurance?
Buying a property for commercial buy to let purposes is becoming more popular with landlords wanting to extend their portfolio or for business owner who wish to take the jump from rented premises to owned. Any property, regardless of ownership, that is used for commercial purposes must be insured on a commercial property insurance policy in order to offer an adequate level of cover for the owner.
Commercial property owner’s insurance is special protection designed for landlords when letting out to third parties for commercial use and this can include retail, offices, warehousing or any other form of commercial use by the third party.
Commercial property owner’s insurance is not legally necessary but many mortgage lenders will require this insurance when lending money. If you do not take this property owners insurance, you will have to pay for any damage the property suffers and you will also be liable for any third party compensation claims related to the property damage or injury through negligence. It is for this reason that Todd & Cue recommend you to have this insurance for the peace of mind that you will be covered for the different eventualities.
What is Commercial Property Insurance?
Commercial property insurance covers the cost of repairing or rebuilding your business premises, or replacing your stock or equipment. It covers you against risks such as:
- burst pipes (escape of water)
- falling trees
- subsidence theft
There are two types of commercial property insurance:
- buildings insurance
- contents insurance
Buildings insurance covers the cost of repairing or rebuilding your business premises if damaged or destroyed.
Buildings insurance is not required by law, but most mortgage providers will insist that you take out a policy before they give you a loan.
Even if you own your business premises outright you should still consider buildings insurance to cover you against the cost of repairs or rebuilding your property.
If you rent your business premises, buildings insurance is your landlord’s responsibility – but you may consider taking out contents insurance to protect your stock and equipment.
You should always insure your business premises against the cost of rebuilding the property, not against its sale price or current market value.
Most building insurance policies will not cover you for:
- general wear and tear – everyday things that happen to your property over time such as carpets wearing thin
- acts of war or terrorism – buildings insurance policies usually exclude damage caused by terrorism, but we can provide cover for commercial properties for an additional premium.
Contents insurance covers the cost of replacing your business’s stock or equipment if it is damaged or stolen.
Valuing your stock and equipment
If you are taking out contents insurance you should insure stock against its cost price, not its sale price. If there are times when you have more stock on your premises than usual, for example in the run-up to Christmas, you should make sure your insurance covers this.
There are two types of contents insurance policy for business equipment:
- replacement as newpolicies replace an item that has been stolen or damaged beyond repair with a new one
- indemnity policestake wear and tear into account, replacing your items at their current value.
Business interruption insurance covers you if you cannot do business as normal as a result of an event that causes damage to your premises or equipment. It is usually offered as an extra when you buy buildings or contents insurance.