The Various Types of Commercial Property Insurance

Sometimes referred to as commercial landlord insurance, property insurance focuses on protecting property owners who lease out their properties to third parties. A commercial property owner enters into a rental agreement with his or her tenants giving them the right to reside in their properties. The agreement will clearly state that you are the landlord and detail out on the agreed-upon policy.

Commercial Property Insurance will offer a protective safety net for damages on your buildings or the contents inside. The cover will remedy risks from theft, fire, natural disasters and much more. Property insurance is an integral part of business law and is offered by leading attorneys and consultancies countrywide.

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Types of Commercial Property Insurance

What makes it different from domestic landlord insurance?

When contrasting the two areas of property insurance – commercial and domestic – we mainly dwell on the following areas:

I. Type of building

In the actual sense, I am referring to the structural challenges whether steel, asbestos, wooden barns, and the flat roofs. Commercial properties are less standardized in their construction when contrasted with domestic properties. Your asset remains vulnerable to the worst cases of floods, fire, and other potential disasters.

In other cases, we are referring to the wiring and electrical systems. The more the complexity, the more the cost and duration when going about fixing. This is what brings about the specialized insurance product.

II. The tenants

A domestic tenant should not be residing with industrial equipment or housing hundreds of employees, focusing on hazardous waste or operating commercial frying equipment while at home. All commercial insurance products focus on the buildings intended use, after which they propose a cover that commensurates with the risks posed. Insurers providing property insurance policies must understand the types of buildings and what is the intended use. It is with this understanding that the commercial property insurance policy risk assessment is based on.

What cover do you get from commercial property insurance?

1. Property owner’s liability

As the landlord of the commercial property, it is in your best interests to have commercial property liability insurance. The cover is meant for injury and damage claims arising from negligence affecting third parties. In such cases, it is the property owner who is liable and not the tenant residing within the property. The law clearly argues in favor of the claimant, by pointing out the landlords’ responsibility to ensure their property is fully maintained.

For instance, When a third party going about his or her delivery service trips on loose steps as they enter your building, it can expose you to a liability compensation case. If they pursue a legal suit, you could be held liable. The limits on property owner’s liability range from a million to 10 million pounds depending on the severity and degree of negligence.

2. Commercial building insurance

In summary, the rebuild cost. As a key feature in commercial property insurance, the cover aims to repair damaged property or that which needs to be rebuilt. Ensure you are insured for the full cost of what it would take to re-insure your building in the event of a tragedy. If you under-insure your property you will be setting yourself at a disadvantage in the event a tragedy occurs and you receive less than is required to rebuild your building.

Most insurers base their cases on a rule known as the condition of the average clause. This means sums insured on buildings that are inadequate will reduce the percentage claim if underinsured. For instance, if you make a claim for 50 thousand, yet you have insured for 100 thousand despite the real value being 200 thousand, you might end up only claiming 25 thousand. To get the precise figures you might want to use the online free rebuild calculators.

3. Indemnity period

Due to the unpredictable nature of the real estate market, there are times property becomes uninhabitable after getting struck by fire. In such a case, the insurance company will pay you the rent you are not collecting. This way you can’t lose out financially.

The indemnity period is the time duration within which you can make a claim for lost rent expenses and receive compensation. You must be able to distinguish between loss of rent and tenant default insurance. Loss of rent will not protect you in cases where tenants default on the rent, which falls into a special category known as tenant default insurance.

Just how long is the indemnity period? Usually, the indemnity period covers one, two or three years. It should rank high in your property insurance cover priorities given the unpredictability of the rental market. The chances of insurance cover from demolition, debris removal, rebuilding and other forms of claims are less frequent. On the other hand.

4. Your Landlord contents

It turns out there is a difference between building and contents. Anything not structurally attached to the property is a content. To be precise, content refers to the cupboards, tables, walls, doors, and much more. There are rental properties that arrive on the market when fully equipped. For instance, a cafeteria may contain a fully fitted commercial kitchen. This protection forms part of the content insurance, vital for the protection of your kitchen.

Are your tenants responsible for content insurance? Landlords are not responsible for accidentally damaging your tenants’ belongings. Everything owned by the tenant is covered under the business insurance policy.

What else is covered?

5. Accidental damage

Usually not offered as a standard, you must ensure you receive full accidental damage cover. Accidental damage is regarded as damage on property not categorized under any other insurable risk. A good example would be a burst pipe rising from nailing a wall.

6. Legal cover

This cover assists with legal fee costs incurred when taking an individual to court for failure of making the right payments. The legal cover does not qualify as a standard policy feature but manifest as an optional policy add. As with other extras, none of these policies qualify as legal or essential requirements you will have to determine just how much you are interested in.

7. Damage from malicious tenants

According to the law, tenants are deemed to be rightfully inhabiting your property with your authorization as the owner. That is why this form of insurance does not meet the standard requirement test. However, in the event that they decide to wreak damage to your property you might salvage yourself from incurring such damages.

What a commercial property homeowner should look out for:

Unoccupied properties

It is no surprise when an unoccupied property falls victim to petty crime, break-ins or squatting. Such happenings expose the property owner to unnecessary damage expenses. Top insurers prefer to exclude unoccupied property cover in their standard insurance policy cover.

This means a temporarily unoccupied property will experience tenant changeover or unprecedented renovations that run for about a month. After this period, some companies will allow adjustments to the insurance policy so it can cover unoccupied property insurance coverage.

Accidental damage

A legal expert in the real estate and property industry will inform a property owner client to find out what exclusions have been made on their accidental damage insurance policy. Such exclusions are purposeful to safeguard the insurer from settling inevitable claims such as wear and tear.

Such exemptions will assist you to understand your insurance agreements. This covers maintenance, particularly tree surgery and plumbing. As with several other commercial policies, you will not receive a period of cooling down other than free cancellations. Look this up in your quotation so you can remain aware of all options available.

Flat roof warranty

Anyone residing in a domestic home will find a leaking roof as a major inconvenience. When it comes to commercial property, it’s much more than an inconvenience. Disenfranchised tenants will move away resulting in loss of rent as well as damage to contents which are owned by the tenant. Buildings with flat roofs prove problematic when it comes to leaking roofs.

As a result, it is no surprise that several insurance companies add a flat roof warranty clause in their commercial property insurance policies. The homeowner is mandated to carry out a given value of the investment on their flat roofs. The service will point out that the roof has been subject to professional servicing and repair.

Tips for commercial landlords

A single building with both commercial and domestic properties. Ever wondered whether you can receive insurance coverage for a combination of domestic and commercial properties in one building? According to property advisers, it is possible and there are several properties insured in this manner nationwide.

Tenant improvement

Any structural improvements carried out by the tenants should be included in their business insurance. In as much as they will form part of the building after installation, the ownership still rests with the tenant even though they will leave them behind when they move out. However, for as long as they reside in the commercial property, ensure the improvements so you can both benefit.

Financial interests

Banks, investors, and other lenders prefer a property that is adequately insured so they can count on the security of their investment. You can even register in a joint named policy, though it will need thorough guidance from an advisor on the particulars.

Policy details worth going through

  • Take time to carefully read through your insurance policy, clearly understanding what the exclusions mean. Failure to read through might leave you disenfranchised when damage occurs only to find out the risk was excluded from the policy. If you do not understand the policy, find someone who does and can simply explain it to you.
  • The regular conventional home insurance will not offer you cover if it’s a rental property.
  • If the property in question is a leasehold, confirm with your property managers if they have buildings insurance before you decided to own it. If they do, you will not need it.
  • Building insurance will not cover the property contents, therefore, you must distinguish that from content insurance.
  • Fixtures and fittings fall under building insurance cover unless it is a flat where the freeholder bought them. In such a case, you only qualify for the fixture and fitting insurance.

When renting out commercial premises here are some things to consider:

1. Consent by third-parties

At the outset you must ponder any potential third-party consents right before the lease is completed. This consent can arise from lenders, particularly the case where the property is chained to a mortgage. On receiving consent from your superior landlord, you will be subject to the leasehold property interest.

These are some of the issues that delay your process resulting in frustration from your landlords. Any solicitor will give you a good idea of the best third-party consent required.

2. Security of tenure

Failure to deal with security of tenure provisions within the Tenant Act can affect your lease. A default provision in the document points out the protections within the act. In that regard, your release will not come to an end on completion. For the lease to arrive at a systematic end we should avoid pertinent tenant lease renewal rights. This gives your Landlords and tenant a provision for contracting out.

3. Repair

A smart landlord prioritizes the state of the property by conducting the frequent repair. This helps them determine the condition of their property. The extent of the property agreement you are offering the tenant is important in this aspect, the tenant will not have a responsibility for structural issues.

For instance, a tenant is under no obligation to leave the property in better condition than the state in which he left it. In such a scenario, they must agree to a unique condition schedule which clearly displays the state of your property at the beginning – usually, this is photographic. You release should not be kept in a position that is worse than that which has been documented.

4.Tenant quality

You must be cautious about the quality of your tenants. In the event that the tenant defaults on the rent or lease, you must be in a position to recover monies that are due. If the proposed tenants come from limited companies you must check whether they own some of the assets they claim. Alternatively, you can ask the directors or shareholders how you can receive a personal guarantee on the tenant covenant lease.


The coverage cost for your property and the cost of this cover varies depending on the nature of your property and its asset value. The coverage will cover all risks particularly those under specific named policies. The coverage should cover risks which cannot be named in the standard policies. The coverage costs eventually depend on the property asset value and whether you opt for coverage on extra risks.

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