Commercial Property Insurance
Owning and letting commercial property carries a different set of risks from residential letting. The type of business operating from the premises, how the building is used, and the terms of the commercial lease all affect the cover that may be appropriate, and what a standard home or residential landlord policy would not cover.
Commercial landlord insurance is designed for property owners who let premises to businesses. Compare Landlord connects commercial property owners with specialist brokers who can discuss the nature of your property and tenancy, and outline the cover options available.
What Kind of Cover Do You Need?
The risks associated with a commercial property will vary considerably depending on its use. A restaurant or takeaway kitchen presents a higher fire risk than an office; a retail premises in a busy location may face different security considerations from a warehouse on an industrial estate. Insurers assess commercial properties individually, and the cover available will reflect the specific risk profile of the building and its use.
When exploring commercial landlord insurance, the main areas of cover to consider include:
Buildings Insurance
Cover for the structure of the building against damage caused by events such as fire, flood, storm, escape of water, or vandalism. The sum insured should reflect the full rebuild cost of the property rather than its market value. It is worth ensuring this figure is accurate, as underinsurance can significantly affect a claim outcome. External structures such as boundary walls or canopies may sometimes be included or available as an extension, depending on the policy.
Contents Insurance
While business tenants are responsible for insuring their own stock, equipment, and trade fixtures, a commercial landlord may still have their own contents within the property, i.e. fitted kitchen appliances in an office kitchen, bathroom furniture, reception seating, or communal area furnishings, for example. A broker can help identify what may need to be covered under a landlord contents policy.
Property Owners’ Liability Insurance
As the landlord, you have a legal responsibility to ensure the building and its communal areas are reasonably safe. If a visitor, tenant employee, or contractor is injured on the premises, particularly in communal areas such as stairwells, car parks, or shared corridors, a claim could be made against you as the property owner. Property owners’ liability cover may assist with legal costs and compensation in these circumstances.
Employers’ Liability Insurance
If you employ anyone to carry out work on the property, such as cleaners, maintenance staff, gardeners, or decorators, employers’ liability insurance is a legal requirement under the Employers’ Liability (Compulsory Insurance) Act 1969. Failure to hold adequate cover can result in significant fines. This cover is designed to protect employees who are injured or become ill as a result of work carried out on your behalf, and may assist with legal costs and compensation claims.
Loss of Rent and Business Interruption
If the building becomes unusable due to physical damage, such as a serious fire, for example, or extensive flood damage, your commercial tenants may be unable to trade. If they cannot operate, they may be unable to pay rent, which could affect your rental income for the duration of repairs or reinstatement work.
Loss of rent cover may provide financial protection if the property becomes uninhabitable following an insured event and rental income is lost as a result. This is distinct from business interruption insurance held by the tenant, which relates to their own trading losses.
It is worth discussing with a broker what the indemnity period under a loss of rent policy would be. Reinstatement of a commercial property following serious damage can take considerably longer than a residential repair, and an indemnity period that is too short may leave you exposed.
Optional Covers to Consider
Depending on the nature of your commercial property, a broker may also discuss the following additional cover options:
Accidental Damage
Extends cover beyond specific insured events to include unintentional damage to the building’s structure, fixtures, and fittings.
Subsidence Cover
Subsidence can be a consideration for older buildings or properties in certain locations. Repairs to foundations and structural damage from ground movement can be costly. A broker can advise on whether this is relevant to your property and whether it is included as standard or available as an extension.
Terrorism Cover
Available as an extension on some commercial property policies, particularly for properties in higher-risk locations or certain building types. Worth discussing with a broker if it is relevant to your situation.
Legal Expenses Insurance
May assist with legal costs arising from disputes with commercial tenants, lease disagreements, or other property-related legal matters.
Unoccupied Property Cover
Standard commercial property policies typically include conditions around unoccupied premises, for example, restricting certain elements of cover if the building is vacant for more than 30 or 60 consecutive days. If your property is between tenancies or undergoing refurbishment, it is important to notify your broker and discuss whether your cover remains appropriate.
Commercial Leases and Insurance Responsibilities
It is worth being aware that commercial lease agreements often set out specific insurance obligations for both landlord and tenant. Some leases require the landlord to arrange buildings insurance and recharge the premium to the tenant as a service charge; others may place certain responsibilities on the tenant directly. Reviewing your lease terms alongside your insurance arrangements is advisable, and a specialist broker can help ensure the two align.
How It Works
Fill in one short form with details about your commercial property, e.g. the type of building, how it is used, its current tenancy status, and the level of cover you are looking to explore. Specialist brokers will be in touch to discuss your requirements and the options available.
There is no obligation to proceed, and no need to approach multiple providers separately.