Guide to commercial property insurance

The value of commercial property in the UK has grown by an average 3% a year since the turn of the millennium, according to a report in Finance Monthly on the 12^th of February 2018. Commercial property investments currently total an estimated £486 billion and, if you want to expand your portfolio, 2018 may be just the year to do it, says Finance Monthly.

The figures help to underscore the considerable sums invested in commercial property. With that scale of investment, every single property needs to be adequately protected against loss or damage – and the means for securing that protection lie in commercial property insurance.

What it covers

So how does commercial property insurance safeguard your investment – what does it cover?

Building and contents insurance

• the principal concern of any commercial property insurance, of course, is to safeguard the structure and fabric of the building, and its contents, against a wide range of risks – including flooding, fire, explosions, storm damage, impacts from vehicles or falling objects, theft and vandalism;

• your tenants or leaseholders remain responsible for arranging their own insurance for the contents they own;

Public liability insurance

• more than any other type of property, perhaps, commercial property is more than usually vulnerable to the liabilities that come with being the owner and landlord of the property;

• commercial buildings are likely to attract more than the usual number of visitors and accommodate your tenants and their staff – if any one of these, a neighbour, or a member of the public is injured or has their property damaged through some connection with the property, you may be held liable and ordered to pay compensation;

• those claims may be substantial – especially if injuries or even death are involved – so the public liability indemnity insurance typically incorporated in commercial property insurance is usually no less than £1 million and is frequently £5 million or more if the building is large or especially prestigious;

Compensation for loss of rental income

• you are likely to have invested in commercial property not only for the expected capital appreciation of the asset but also the steady income from the rents you receive from tenants and leaseholders;

• if a serious insured event leaves the property temporarily unusable, that rental income is forfeit, so commercial property insurance also typically provides for compensation for the loss of income;

Buying commercial property insurance

• given the size of your investment and the potential for severe losses through damage to the building, your liabilities as the landlord or loss of rental income, there is a lot at stake in the commercial property insurance you arrange;

• therefore, you might want to draw on the expertise and advice of a specialist broker to help identify your needs and requirements for suitable cover at a competitive price;

• the British Insurance Brokers Association (BIBA) makes the point that such a broker works entirely in your own interests and that role is underscored by the authorisation given to any broker by the industry’s regulator, the Financial Conduct Authority (FCA);

• a specialist broker’s knowledge of this sector of the insurance market helps to ensure that you are offered the most competitively priced products and also comes to the fore in assessing and managing the risks to which your commercial property is exposed.

If you are considering an investment in commercial property or planning to expand or diversify your current investment portfolio, therefore, you need to consider the safeguards and protection offered by commercial property insurance.