Similarly to a Landlords Insurance, which you take out for a residential property leased out to residential tenants, a commercial property owner needs to take a policy out that will protect their property from physical damage, as well as loss of rent, damage to fixtures and fittings, breakdown of motors and machinery like air conditioning plant or lift motors etc, as well as your liability.

What does a Commercial Property Owners Insurance cover?

Policies will cover physical damage to the property as a result of insured events and accidental damage, as well as tenant damage, malicious or wilful damage, as well as glass cover for fixed or plate glass (both internal and external).

You should also insure your rental income under the Business Interruption section, which provides cover for loss of rent due to insured events. For example, a fire that partially destroys the property and your tenant relocates as they can’t operate there any longer. This policy section will cover your lost rent as a result of this event up to the sum insured specified (and as per your lease agreement) and for the period of time indemnified under the policy.

The policy also includes your Public Liability as the property owner. As the property owner who is responsible for maintaining it and providing a safe and fit for purpose property for your tenant, you have an obligation to ensure that that wonky step, or the water leak in the ceiling is fixed and maintained or you could face personal injury or property damage claims against you.

This is very different to, and shouldn’t be confused with, the Public Liability cover that your tenant has for their business. A Commercial Property Owners Insurance will exclude the business activities of your tenant under your Public Liability section.

There are additional sections you can take under a Commercial Property Owners Insurance however the above are the basics that every policy should include. Further sections to consider include money cover, tax audit, machinery breakdown, and rent default (only offered by select insurers).

How is this different to a Business Pack policy?

Well, commonly these policies are taken as a Business Pack however it is then structured to accommodate whatever tenant business occupies your property. For example, if you let out your property to an a Solicitors office, the risks associated with this type of business are relatively low, and the policy premium is likely to reflect the low risk. By comparison, a manufacturing or industrial type tenant, who perhaps does some welding or spray painting for example, there is a much higher chance of property damage as a result of the tenants activities so the premium is likely to be higher than if you had a lower risk tenant.

There are lots of different factors that make up a premium however your tenants occupation, coupled with the physical attributes of the property (its construction, age, security and fire protection for example), along with location, occupation of neighbouring properties and previous claims history, all go into determining the premium.