What Does Commercial Property Insurance Cover?
Commercial property insurance packages can be customised, so there is variety in what is covered, but there are some standard coverages to look for in a policy. Buildings and property owner’s liability are typically minimum coverages for the property owner, and occupiers (the owner or tenant) would start with contents coverage. Plus, there are many optional extra coverages for commercial properties.
According to the NimbleFins commercial property insurance guide, here is an overview of the common types of commercial property insurance coverage. All policies are unique and have their own set of coverages and exclusions so that coverage can vary from policy to policy. Be sure to understand exactly what is and isn’t covered by a policy before buying.
Buildings insurance. Covers the building against damage from covered events like fire, flood, and theft or attempted theft, vandalism, etc. Covers repair or rebuild costs.
Contents insurance. It covers the cost to repair or replace the contents of a building, which can include furniture, furnishings, business equipment, stock, etc., if they’re damaged in a covered event like fire, flood, and theft or attempted theft.
Property Owners’ insurance. Protects the building owner against liability claims if a third party is damaged on the premise or their property is damaged.
Accidental damage. It can be purchased for both the building and contents to protect against damage or loss due to accidents, such as someone accidentally breaking a window with a ladder.
Tenant’s improvements. It covers the cost to repair or replace structural improvements made to a property, such as adding a new bathroom.
Loss of rent. Covers lost rental payments if a property cannot be rented out because it’s been damaged in a covered event like fire or flood.
Rent guarantee. Covers rent payments if a tenant does not pay their rent.
Malicious damage by tenants. Covers intentional, malicious damage by a tenant, such as vandalising a property by throwing paint on the walls before they move out.
Legal cover. Helps cover legal expenses for situations like an HMRC tax investigation, collecting unpaid debts, or contract disputes.
Business interruption. Covers lost income or increased costs if a business cannot trade due to a covered event, like fire, flood, or storm.
Does commercial property insurance cover fire?
Yes, it is standard for commercial property insurance policies to cover damage caused by fire. However, one should confirm whether this coverage extends to the building or the contents of the building, or both. Commercial property policies can be structured to cover the building only (e.g., the structure, windows, doors, electrics, wiring, floors, ceilings, etc.) or the contents (items one would take in a move, such as a furniture, curtains, equipment, books, etc.) or both.
If a commercial property insurance policy only covers the building, for example, then in the event of a fire that destroys a building, there would be no financial protection for the lost contents of the building.
Does commercial property insurance cover flood damage?
While standard commercial property insurance typically does cover flood damage, there are exclusions to this. For example, a policy might exclude damage due to a change in the water table level or damage resulting from frost, subsidence, ground heave, or landslip.
Also, properties that have previously been flooded or that lie in an area with a perceived risk of flooding might not be covered for flooding under a standard commercial property insurance policy. In these cases, a property owner would need to seek out special commercial property with flood cover.
Does commercial insurance cover property damage?
A commercial insurance policy can cover three types of property damage. If the policy includes buildings cover, it will cover damage to the main property, that is, the building and its walls, windows, doors, electrics, etc. If the policy includes contents cover, it will protect against damage to the contents of the building, such as furniture, equipment, furnishings, etc. And commercial insurance usually includes a form of public liability insurance as well, often referred to as property owner’s liability or landlord liability, which guards against damage to property owned by third parties. For example, if roofing tiles fall from the roof and damage a car below.
Does commercial property insurance cover theft?
Yes, it is typical for commercial property insurance to cover theft or attempted theft, so long as it involves entry to or exit from the premises by forcible and violent means. That is, if a door was left unlocked and a thief could walk in, then insurance would likely not cover the theft. A policy also might not cover theft from empty buildings or theft by employees, tenants, or anyone else lawfully on the premises.