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What is commercial property insurance?

Commercial property insurance is a key type of cover that helps protect many businesses in the UK. But what exactly does it cover, are there different types of protection, and who should have it?

From explaining the different insurance available to listing those businesses that might need it most, we explain what you need to know about this valuable cover.

What is commercial property insurance?

Types of commercial property insurance

There are two key types of commercial property cover: buildings and contents insurance. Together, these cover your business premises, stock and equipment against risks like:

  • Burst pipes 
  • Falling trees
  • Fire
  • Flooding  
  • Riots
  • Storms
  • Theft

Buildings insurance

This covers the costs to repair and rebuild your company premises if they’re damaged or destroyed.

With this cover, it’s important to insure your premises against the costs to rebuild them, rather than their sales price or market value.

Contents insurance

This covers the costs to replace your stock and equipment if it’s damaged or stolen.

With this cover, you should insure your stock and equipment against the cost price, not the sales price, of the items.

It’s also important to make sure your insurance covers you when you have more stock on your premises than usual. For instance, in the run up to Christmas or when you’re trying to quickly sell off seasonal stock.

When covering your business equipment, there are two types of contents insurance policy to consider. These are:

  • Replacement as new – If an item has been stolen or is damaged beyond repair, this policy allows that item to be replaced with a new one
  • Indemnity policies – if your items have been damaged through wear and tear, this policy takes that into account. However, the item will be replaced at its current value, not its original value

Business interruption insurance

This is an additional type of cover to consider, which is usually offered as extra protection when buying buildings and contents insurance.

It covers you if an event causes damage to your premises and equipment, which results in you not being able to conduct business as normal. This includes cover for:

  • Shortfall in your pre-tax profits
  • Increased costs in running your business, like from additional accountant fees

What does commercial property insurance not cover?

Most buildings insurance policies will not cover:

  • General wear and tear that can happen over time, such as an office carpet thinning
  • Damage that has been caused by an act of terrorism. Specialist insurers might offer this as an additional premium

Do I need this cover?

Commercial property insurance is not required by law. However, it’s important to bear in mind that most mortgage providers will insist that you have buildings cover before they give you a loan.

Companies that usually carry, and can benefit from, commercial property insurance are:

  • Manufacturers
  • Not-for-profit organisations
  • Retailers
  • Service-oriented businesses

That said, if you own your business premises, it’s still worth considering this insurance to protect you against the costs to rebuild and repair the property.

If you rent your premises, acquiring buildings insurance is your landlord’s responsibility. However, it’s wise to consider contents insurance to cover the costs of having to replace your stock and equipment.    

Helping you with insurance for your business

There are different types of business insurance available to protect your company, and commercial property cover is just one of many to consider. You can learn about others in our blog, What sort of business insurance do I need?

At FSB, we provide key insurance services to help our members find the right cover for their company. This includes:

  • A team of expert insurance advisers to save time and money
  • Free insurance claims advice, no matter how complex
  • Services to compare policies across the market
  • Higher levels of insurance cover where possible

If you would like to learn more about our business insurance services and how they can help you, please visit our FSB Insurance Services page or speak to a member of our team.

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