You may believe that you have arranged all of your business correctly under one policy, however you may be missing fundamental and critical cover to ensure that you have protected your property correctly.
Who Owns The Property?
If you own the property personally (or via a pension fund, separate business/company) then you should arrange cover on a separate Commercial Property owners policy. The existing business insurance policy is then left to insure the remaining assets of the business (machinery/plant/stock etc) together with their liabilities.
The crucial issue here is that the person(s), business, company that owns the property is the one that should insure it. This is an issue of insurable interest; you have to have an insurable interest in something to be able to insure it – usually by way of ownership or via a leasehold interest for example.
If you own your building personally and you are currently insuring it on a business policy that is in the business/company name then the property is technically not insured unless the Insurer has specifically agreed otherwise. Insurers take differing approaches to these situations but in our view, the property is better insured under a separate property owners policy. Ignoring the issue leaves you in a potentially difficult position in the event of a claim.
What Is Commercial Property Owners Insurance?
Commercial property or commercial landlord insurance is protection for property owners who are letting out to third parties for commercial use. Your tenant is the business, organisation or group who has a rental agreement in place legally allowing them to inhabit your property. It is this agreement that defines you as a landlord and which qualifies you for such a policy.
What Does Commercial Property Owners Insurance Cover?
Property Owners’ Liability
For commercial property this is often the most misunderstood or overlooked by commercial landlords. Liability insurance for commercial property is to compensate third parties in respect to property damage and injury through negligence. You are liable, and not your tenants in these circumstances because its ultimately the landlord’s responsibility to oversee that their property is adequately maintained.
Commercial Building Insurance – Rebuild Cost
This is one of the most important features of commercial property insurance. It exists to cover the costs for repairing damage or rebuilding. You must be insured for the full cost of what it would be to rebuild your property should it be destroyed. Being under insured (meaning the state the full re-bui8ld cost as less than it really is) could be catastrophic should something happen which would mean you need to claim for the full amount.
Loss Of Rent – Indemnity Period
If your property should become uninhabitable from an insurable event such as a fire, the insurance will pay out the rent you are subsequently unable to collect, meaning you aren’t losing out financially. The indemnity period is the length of time you can claim for ‘loss of rent’ expenses. In regards to the indemnity period, 12, 24 or 36 months are commonly available, and it should be seriously considered what is adequate for your building. This is because in the worst case, demolition, debris removal, architects and finally rebuilding can take years.
One way to understand the difference between your ‘contents’ and your building is to hypothetically turn your property upside down. Anything that is unattached would be classed as contents. This would mean tables and chairs are contents whereas the doors, cupboards and walls come under building insurance.
Are Tenants Responsible For Their Own Contents Insurance?
As a landlord you are not responsible for accidental damage to your tenants’ belongings. Anything that the tenant owns will be covered under their own business insurance policy.
John Heath Insurance Brokers Commercial Property Insurance
We can offer bespoke commercial property owners’ insurance from a panel of more than 15 leading UK Insurers including Aviva, AXA, NIG, RSA and many more. Unoccupied, multi-tenure and non-standard construction risks are also catered for. To find out more information about our product or to obtain a quote, please contact a member of our team.