The different types of commercial property insurance

According to the British Property Foundation (BPF), the whole of the UK’s commercial property is currently valued at some £1,662 billion and represents around 21% of the nation’s total net wealth.

The sheer size of that estate means that there are very many different types of commercial property – and safeguarding that wide variety are many different forms of commercial property insurance.

To understand the nature of those differences, let’s look at the various types of commercial property insurance.

Your business premises

Many commercial properties are owned by companies as their headquarters or the premises from which they carry out the various aspects of their business.

Property insurance, in this case, is an essential means of safeguarding one of the principal business assets – usually representing a significant investment.

If there is a commercial mortgage on the property, then as part of your mortgage agreement, you will typically be obliged to have appropriate commercial buildings insurance cover to protect the mortgage provider’s interest in the property too.

  • Protecting your business’ contents

In addition to protecting the structure and fabric of the building, this type of commercial property insurance can also have the option to safeguard the contents – the plant, machinery, equipment, supplies, materials and finished goods used by your business.

  • Liability insurance

Property owners’ liability insurance is also typically included. This gives indemnity against claims made by third parties who may be injured or suffer material damage through your actions or inaction as the owner of the property.

  • Business interruption insurance

In the event of significant damage or loss of the property, your normal business activities are likely to be disrupted. So commercial property insurance may also offer compensation for your loss of income by way of business interruption insurance.

Investment property

Where a commercial property is owned as an investment and leased to tenants, specialist landlord insurance is necessary. It recognises the fact that the property is valued in terms of the rental income it generates.

Therefore, a different type of property insurance is required, which still protects the structure and fabric of the building but also safeguards the owner’s interests as a landlord.

Important amongst these is the landlord’s duty of care towards the tenants who lease the commercial property. In the event of a tenant, one of their customers or a member of the public suffering an injury or having their own property damaged, the landlord may be held liable and ordered to pay a substantial sum in compensation. Commercial property insurance for landlords is designed to provide indemnity against such claims.

In the event of a major insured incident which leaves the leased property unusable by the tenants, the landlord is likely to suffer a loss of rental income – for which commercial property insurance for landlords may provide financial compensation.

Unoccupied property insurance

The third type of commercial property insurance offers an essential safeguard in the event of the property becoming empty and unoccupied for anything longer than a month or two.

The property insurance normally in place when the building is in use – by its owners or by tenants – typically reverts to a basic, minimal level of cover when the premises are unoccupied. Specialist unoccupied property insurance for commercial property is needed to restore the full level of protection that may be required.

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