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Many commercial property owners assume that their buildings insurance policy provides adequate coverage in the event of a disaster. However, this is not always the case. Insufficient building insurance for business can lead to significant financial losses and even bankruptcy, or losing your business.

It is crucial for business owners to regularly review their buildings insurance policies to ensure that they have adequate coverage.

Contact ClaimRite for assistance with your commercial property insurance claim.

Considerations For Commercial Buildings Insurance

There are several factors to consider when determining whether a business property is adequately insured. These include the value of the commercial property, the rebuild cost, and the potential risks and hazards in the surrounding area, but most importantly, the building’s sum insured must be adequate to pay for demolishing and rebuilding the business premises outright in the case of a total loss.

Business property owners should also consider the type of insurance coverage they have, such as commercial buildings insurance, public liability insurance, and business interruption insurance.

By taking these factors into account, building owners can ensure that their commercial building insurance policy provides their commercial properties sufficient coverage.

Understanding Commercial Property Insurance

Buildings insurance is a type of insurance policy that covers the cost of repairing or rebuilding a property in case of damage or destruction. While it is not a legal requirement, it is an essential insurance for any commercial property owner or landlord.

If you have a mortgage, building cover is usually a loan condition of the mortgage lender.

Buildings insurance policies typically cover damage caused by fire, flood, water, storm damage, criminal damage, and other unforeseen events.

The insurance company will pay the repair or rebuild cost on the premises, up to the policy limit or ‘sum insured’.

Different From Contents Insurance

It is important to note that commercial buildings insurance does not cover its contents. Contents insurance is a separate policy that covers the cost of replacing the contents of a commercial property, such as furniture, appliances, and belongings in case of a claim.

When purchasing buildings insurance, it is important to work with a reputable insurance company or broker. They can help you understand the business insurance coverage options and policy limits that are available.

Factors Influencing Commercial Property Insurance Cover

Some important factors to consider when purchasing buildings insurance include:

Property Location

Buildings located in areas prone to natural disasters, such as floods or earthquakes, may require additional protection or be excluded, subject to the policy.

Property Age

Older buildings may require more coverage due to the higher risk of damage.

Type Of Commercial Property

Different types of buildings, such as commercial or residential, may require different coverage options.

Commercial property insurance cover is highly recommended for the owner of any commercial property.

The owner of any residential premises is recommended to have landlord insurance cover.

Construction Type

The materials and type of construction can sometimes exclude the building under certain policies, or require extra disclosure.

Reinstatement Value

The policy limit/sum insured should be sufficient to cover the demolition and rebuild cost, to include a provision for specialist fees, such as surveyors and architects.

Assessing Adequate Coverage

Assessing whether a building has adequate insurance coverage is crucial to ensure that the property owner is protected from unforeseen financial losses.

It is important to understand the different types of coverage available and get the right cover for your commercial property.

Commercial Property Insurance Is Essential

It provides protection for the physical structure of the building and in many cases, its fixtures and fittings. Often tenants are liable for these as outlined in the tenancy agreement. It is important to ensure that the business property insurance cover is sufficient to cover demolition and reinstatement in the event of a total loss.

In addition to building cover, building owners should also consider other types of cover such as liability, business interruption (or loss of rent), and equipment breakdown cover.

Commercial liability and public liability insurance provide cover for building owners if someone is injured on the property. This includes legal expenses and professional fees.

Employers liability insurance covers you if an employee is injured or falls ill because of their work

Business interruption cover will insure you for lost income if your business premises is unable to operate (or be occupied) by customers due to a covered loss.

Contents insurance covers any damaged contents in a covered loss. Contents cover is especially important if you want to claim as a small business.

Equipment cover will insure you for the repair or replacement of equipment that is essential to the operation of the business. This is especially important if your business operates out of one location, with lots of expensive equipment or machinery.

Regularly Review Your Commercial Building Insurance

It is important to review commercial property insurance policies regularly to ensure that they are up-to-date and protect your commercial property. Commercial property owners should work with their insurance brokers to assess how much cover they need and add cover from new policies if necessary.

Owners of commercial premises should seek professional advice from a broker or even a Quantity Surveyor* if they are unsure that the sum of their buildings insured is adequate.

Determining Replacement Costs

When it comes to commercial building insurance, determining the actual expense of reinstatement is crucial. Reinstatement cost is the amount of money needed to replace the entire property with materials of similar kind and quality to the original, taking into account current demolition prices, construction costs and rebuild costs.

It is important to note that the reinstatement cost is not the same as the market value of the property. The market value takes into account factors such as location, demand, and the condition of the property, whereas the reinstatement cost is solely focused on the price of demolishing and rebuilding the property.

Property owners should also take into account the value of inventory and any other business property that would need to be replaced should they make claims on contents insurance. This can include furniture, fixtures, and equipment.

Risk Factors and Coverage Types

When it comes to insuring a business premises, there are many risk factors to consider. Buildings can be damaged or destroyed by fire, vandalism, theft, burglary, floods, and many other causes. It is important to understand the different types of coverage available to ensure your premises are adequately insured.

Fire

Fire is one of the most common risks that buildings face. It can cause significant damage to the structure, as well as any contents inside. Almost every insurance policy covers damage caused by fire, but it is important to check the policy to ensure that it will protect you adequately.

Vandalism and Theft

Vandalism and theft of equipment, stock and other contents can also cause significant damage and loss. Commercial property insurance policies may cover damage caused by these events, but it is important to check the policy wording to ensure it will protect you from these risks.

Most policies will apply strict (and small) limits under this type of claim and therefore if a policyholder owns specific items that are at risk of theft or malicious damage, they should speak to their broker about a specialist policy for these specific items.

Floods

Floods can cause significant damage to a premises, and some insurance policies do not cover damage caused by floods. It is important to check the policy to ensure that it covers this risk.

Some properties are simply unable to obtain flood cover due to their location or other factors.

Some properties can obtain flood cover under special conditions, such as the presence of a large excess. This means that small claims (with a value lower than the excess) will effectively be covered by the policyholder and not the insurance company

Financial Implications of Being Under-Insured

When it comes to property insurance, the financial implications of being underinsured can be significant. In the event of a total loss, the expense for repairing or rebuilding can be substantial, and if the insurance does not protect the property adequately, the owner may be responsible for covering the difference.

Premiums for property insurance policies are determined by several factors, including the location and age of the property, as well as the value and reinstatement cost of the property. While it may be tempting to pay a lower premium, it is important to consider the potential costs of being under-insured.

Excess

In the event of a loss, the excess is the amount that the policyholder is responsible for paying before the insurance coverage kicks in. It is important to choose an excess that is affordable, but not so high that it would be a financial burden in the event of a loss.

Repair Costs

Depending on the extent of the damage, repair costs can be quite high, and if the property is under-insured, the owner may be responsible for covering the difference.

Inflation

Inflation can also impact the chargeable amount for repairing or rebuilding a business premises, so it is important to take this into account when setting coverage limits and sums Insured.

If you would like to speak to an expert about this or any other aspect of your claim, call our free Property Claim Helpline on 0800 002 5819, for a no obligation consultation.

Disclaimer

All content within this or any column, or via the free helpline, is provided for general information only, and should not be treated as a substitute for the Insurance advice of your broker or any other insurance professional. ClaimRite is not responsible or liable for any decisions made by a user based on the content of this site or the free helpline.

ClaimRite is not liable for the contents of any external internet sites listed, nor does it endorse any commercial product or service mentioned or advised on any of the sites. Always consult your insurance broker if you’re in any way concerned about your cover.

*This will incur surveyors fees.