Buildings insurance
Buildings insurance covers the cost of repairing or rebuilding your business premises if damaged or destroyed. It is not required by law, but most mortgage providers will insist that you take out a policy before they give you a loan.
Even if you own your business premises outright you should still consider buildings insurance to cover you against the cost of repairs or rebuilding your property. If you rent your business premises, buildings insurance is your landlord's responsibility – but you may consider taking out contents insurance to protect your stock and equipment.
You should always insure your business premises against the cost of rebuilding the property, not against its sale price or current market value.
Contents insurance
Contents insurance covers the cost of replacing your business’s stock or equipment if it is damaged or stolen.
If you are taking out contents insurance you should insure stock against its cost price, not its sale price. If there are times when you have more stock on your premises than usual, for example in the run-up to Christmas, you should make sure your insurance covers this. There are two types of contents insurance policy for business equipment:
REPLACEMENT AS NEW POLICY: These policies replace an item that has been stolen or damaged beyond repair with a new one indemnity polices take wear and tear into account, replacing your items at their current value. For example, if you bought an item in 2021 for £1,500 and it’s valued at £1,000 in 2023, your insurer will pay out the lower amount if you make a claim.
INDEMNITY POLICY: This takes wear and tear into account, replacing your items at their current value. For example, if you bought an item in 2021 for £1,500 and it’s valued at £1,000 in 2023, your insurer will pay out the lower amount if you make a claim.
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Buying commercial property insurance
Whilst commercial property insurance is not obligatory, some mortgage providers require you to have building insurance in place. Purchasing commercial property insurance will provide cover should anything happen to the building in which you would have to cover the cost yourself. Valuing the property at its rebuild cost will determine the amount of cover you need and so estimating accurately will have a significant impact on the premium cost.
Speak to a specialist broker through the British Insurance Brokers’ Association (BIBA) to find out more about the level of cover you might need.
FAQs
What does commercial property insurance cover?
Commercial property insurance covers your business premises against risks such as:
- Fire
- Storm
- Flood
- Subsidence
- Burst pipes (escape of water)
- Theft
What does commercial property insurance not cover?
Like personal home insurance, policies cover a wide range of risks, but it does not cover everything and so it important to read your policy so understand what is not protected to decide whether you need to take out additional cover. While general exclusions may vary between policies, you will not usually be covered against:
- General wear and tear of property and other age-related issues to either the property or its contents.
- Damaged caused by poor work completed by a contractor. Should there be an issue with the work, you would need to claim against the contractor and not your insurance policy. Additionally, if your own employees completed the work, you would need to rectify it and cover those costs yourself as your insurance will not cover any cost.
Commercial property insurance policies usually exclude damage caused by terrorism, but specialist insurers can provide cover for commercial properties for an additional premium. Cover for terrorism is supported by the Pool Re scheme, which provides government-backed funding to ensure that business owners are protected against losses from damage caused by acts of terrorism.
