Commercial property insurance might prove essential or even mandatory in many situations.
Here is a quick overview of why.
What is commercial property insurance?
Individual insurers may have slightly different definitions of what constitutes commercial property. However, most will probably define it as a property which is being used, in all or part, for business purposes.
Certain obvious examples include:
- shops and retail outlets;
- storage depots and warehouses.
However, there are some subtleties here that also need to be considered:
- a standard house which is used partly for residential purposes and partly as a base for some form of business;
- shops which may have accommodation units incorporated;
- a house being let out in full or part for the purposes of income generation through rent. This is a typical landlord situation.
In all the above situations, any form of owner-occupier or residential property insurance would typically be unsuitable. Commercial property insurance will most likely be the required solution.
Commercial property insurance is required in a business environment for a number of different reasons:
- in any establishment where you have employees and/or the public, the risk of accidents and subsequent third-party liability claims will be substantially higher than in most corresponding residential situations;
- some commercial activities might include potentially dangerous machinery or other production processes and materials, which may constitute a higher risk to the structure than would be the case in a typical home;
- many commercial properties are unoccupied every night and every weekend, thereby increasing the risks of burglary;
- many businesses have far higher contents values than a normal residential household.
This is just a small sample of the reasons why specific commercial property insurance is required.
If you own or operate commercial premises, there may be a number of situations within which you will be legally or contractually obliged to have appropriate commercial property insurance cover in place:
- depending upon the nature of your enterprise, your commercial property insurance may need to provide you with very large amounts of public liability insurance and your local authority licensing may make that a formal requirement;
- if you have any form of mortgage or other lending secured against your property, you will typically be contractually bound to have appropriate commercial buildings cover in place in order to protect the lender’s investment;
- as a related issue, under most circumstances where you have employees, you will also be obliged to have appropriate employers’ liability insurance.
If you’re using a property for rental income purposes, even where the majority of the property continues to be occupied by you as your normal place of residence, you are by definition a landlord.
As such, your property will need to be covered by specific landlords’ insurance.
Leased commercial properties
In situations where you are renting or leasing commercial property, it is imperative to check exactly who is responsible for insuring what, in terms of your relationship with your landlord.
As a general rule, the commercial property insurance for the building itself may be covered by the property’s owner – though do verify that. You may though be responsible for all other forms of cover including contents and materials.
Even in the context of the property as a building or structure, look closely at your obligations. If the building is substantially damaged as a result of your activities then the owners may have a legal right to seek full compensation from you.
This has only been a very brief overview of some of the issues associated with commercial property insurance.
It would be worth finding out more from an experienced provider of such policies.