Knowing Which Are The Right Commercial Property Insurance Policies For You And Your Property

If you have decided to make a living out of buying and letting commercial properties, making sure that you are properly insured is essential. If you apply for a commercial mortgage to purchase retail, office, factory or warehouse space accessing the correct property insurance is a vital part of the commercial property process. In the same way that you would make sure you had the correct insurance policies on your home, it is crucial that you protect your commercial property business against a range of potential risks.

Being covered for every eventuality conceivable is going to go a long way to reassuring you and you're tenants if the worst happens. One bonus is as your commercial property could be used for a variety of businesses, retail, office or factory; commercial insurance policies can be flexible and be tailored to fit your needs much easier than they could be for a residential property.

Whatever kind of commercial asset it is that you have purchased, you must to ensure that it is fully protected against the main risks such as flood, fire, storm damage, criminal damage or earthquake. The property alone must be insured against these various perils; as it is unlikely that a mortgage lender will even consider offering you a loan without it.

The factors that tend to affect the insurance costs for commercial property insurance include the market value and type of property, whether or not the property currently has tenants, the type of business activity that takes place on the premises. For example, insuring an office is likely to be cheaper than insuring a factory or any other type of manufacturing or heavy industry premises, insurers look at the potential risk they are exposed to and adjust their prices accordingly. The location of the property is also a factor, especially if it is situated in an area with a high risk of flooding.

As a commercial landlord, you may be reliant on the rental income you receive in order to meet your monthly commercial mortgage payments. So, including 'loss of rent' cover on your policy may be advisable. If the property were to be rendered uninhabitable (for example through fire or flood) then you could well lose the rental income on which you rely.

Loss of rent insurance is normally a percent of the buildings sum insured (on average around 15 per cent) and is often restricted to a one year period. This is pre-determined in the agreement and it is created to compensate you for any loss of rent if the property is unable to be let.

Insurance for commercial properties also comes with a wide range of additional kinds of cover that can be included. For instance, you might think it wise to include contents cover if you have added furniture or other contents of the premises. This would insure your contents against a variety of risks including fire, flood and theft.

In addition to this, you can add extra cover for 'property owners liability' (this offers cover if a third party or their property is damaged by your property - for example a wall collapsing or a tile falling from the roof) or 'legal expenses cover' which pays for the cost of legal fees if you need to go to court in a matter relating to the commercial property.

Owners of commercial property who neglect to adequately insure their businesses do so at their peril. The current unstable economy is highly likely to leave landlords with at least part of the year where there are no tenants, and it is impossible to predict whether or not there might be damage to the property in the future.

That said, accessing the proper insurance policy isn't difficult. The soundest strategy is to consult an insurance broker. Most Brokers will have a wide range of cover policies and be able to create a tailored insurance policy for your particular needs.


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Timothy Frodsham writes for Just Commercial Mortgages the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.