One of the most important aspects of leasing a commercial property is making sure that you, your people, and your business are properly insured. The right commercial insurance arrangements will help to protect you from financial shocks and let you continue trading through thick and thin.

Groups like the Association of British Insurers offer excellent advice on how to buy business insurance. Even so, first-time renters are still encouraged to seek advice from a professional insurance broker.

But what is ‘commercial property insurance’, and what does it cover? In this article, we take a look at who is responsible for different types of insurance for commercial premises. We also explore what renters need to ensure they are covered and how to get started.

What is included in commercial property insurance?

Commercial property insurance is a type of coverage for any property used for business purposes. The coverage a particular tenant needs depends on factors such as the nature of the business, who it employs, and what kind of equipment it uses. 

A commercial policy can include:

• Property insurance: This protects your business’s fixtures, fittings, car parks, stock, equipment, and more against “all risks”. These include issues like fires, flooding, or theft.
• Business interruption insurance: This protects your profits and extra expenses if you are prevented from trading by events like forced entry, flooding, and so on.
• Public and employers’ liability insurance: This covers you if anyone is injured or has their property damaged on the premises.
• Marine insurance: This covers stock, ships, and terminals lost or damaged from the point of origin until they reach their destination. This usually also covers any legs of the journey made via road, rail, air, and so on.
• Motor vehicle insurance: This protects your vehicles and drivers in the event of theft, damage or injuries. This is mandatory for any business using a motor vehicle. 
• Employee benefits insurance: This refers to any kind of group coverage provided by employers for staff. This can include medical, life, and critical illness insurance, as well as other types. Though not mandatory, they are a major pull factor for businesses seeking the best talent. 
• Unoccupied commercial property insurance: This protects a property that is kept empty, such as for refurbishment work. It can be more expensive than a quote for an occupied property.

Who insures what in a commercial property?

With commercial property, tenants will usually be responsible for insurance policies on stock, equipment, and liabilities. This can also include business interruption coverage. The building’s fixtures, fittings, and structure will typically be insured by the landlord.

Let’s use our properties as an example. Mileway insures its buildings, while tenants are responsible for insuring contents. Tenants must also obtain suitable public and employers’ liability policies. Our leases detail exactly who is responsible for paying what, ensuring tenants always know what coverage they require. 

Warehouses can get pretty cold in winter. If a pipe freezes and bursts, water damage might affect the building and damage your equipment or stock. After you get in touch with Mileway, we will contact our insurers to start the claims process and get the building shell dried out and repaired. However, our claim wouldn’t cover your equipment, stock, or any disruption to your business. You would need to contact your insurer separately and lodge a claim to cover the damage.

The key is to be prepared. After a claim, you can work together with us and your insurer to quickly get your business back on track.

Are commercial tenants responsible for building maintenance?

While you normally won’t be insuring the building itself, you may still need to take care of a few maintenance tasks. These are common throughout the industry and can include:

• Using hot work permits: These are required for any work involving sparks, heat, or open flames.
• Maintaining fire protection: Where there is fire protection in place (e.g. sprinkler systems), you must carry out proper testing. You must also inform insurers if you plan to make changes or need to isolate protection in an area for more than 48 hours.
• Fire safety: Fire exits must always be kept clear, and any combustible materials should always be stored well away from building walls.
• Security arrangements: Necessary precautions against risk of theft or damage can include locks, cameras or other features, depending on the policy.
• Maintaining frost protection: Pipes must be protected from exposure to freezing temperatures that might lead to damage.
• Managing contractors: Anyone new working on-site must have appropriate insurance in place and have a sufficient understanding of your safety requirements.
• Updating risk profiles: You should always inform your building insurance provider (i.e. your landlord) of any significant changes that could increase the risk from an insurance perspective.

Making sure all of these controls are in place also makes it much less likely that you’ll face an incident that could interrupt or damage your business.

Mileway has a range of commercial properties across the UK. For more information about your responsibilities as a tenant, contact the Mileway team today.

FAQs

Who should pay for building insurance on commercial property?

Building insurance is paid for by the owner of a commercial property. However, you should keep in mind that building insurance policies do not cover internal contents, equipment or liability. 

In other words, even if a tenant is not paying for building insurance, they should always check with their landlord to see what is covered.

What happens if I don’t have commercial property insurance?

If a commercial property tenant does not have insurance, they will not have financial protection against loss or damage. Penalties can include:

• Contracts: If you cease trading or lose the ability to maintain contracts related to your business, you could be left vulnerable to legal action.
• Personal costs: If you are held liable for the costs of any legal claims, compensation offers, and so on, you will have to pay them out of pocket.
• Compliance: Businesses are required to protect their employees. For employers’ liability, you can be fined £2,500 for every day you lack the required coverage.
• Rebuilding: Facing fines, penalties, and other costs is one thing, but what about paying to get your business back on track? Without commercial property insurance, this will become yet another personal expense.

What is office insurance?

‘Office insurance’ is an insurance policy covering the contents, employees and operations of an office. It will usually cover points like:

• Employee liability 
• Contents
• Goods in transit 
• Business interruption

How much is commercial property insurance?

The cost of commercial property insurance varies extensively depending on the coverage requirements of the business in question. Influencing factors include:

• Age of property
• Location of property
• Susceptibility to environmental damage (such as flooding)
• Type of security in place
• Type of business in question
• What the building in question is used for
• Level of coverage desired

A broker will be able to discuss these requirements with you in detail. 

How much is warehouse insurance?

The cost of a warehouse insurance quote depends on the coverage required. This can include:

• Type and costs of contents and equipment
• Number of staff members
• Costs of business interruption
• The business’s history of insurance claims

To reduce your costs for warehouse contents coverage, it would be best to speak to an insurance broker. 

When you rent with Mileway, we will provide you with building insurance and make sure you know what’s covered. Contact Mileway today to find out more about how our insurance policies work.