Commercial property insurance covers you for the costs of rebuilding or replacing stock or equipment. You are protected against the following risks:
- Burst pipes (escape from water)
- Falling trees
There are two types commercial property insurance.
- Buildings insurance
- Contents insurance
- Insurance for buildings
If your premises are damaged or destroyed, buildings insurance will cover the cost of rebuilding or repairing them.
Although building insurance is not required by law to be purchased, most mortgage providers will require you to have a policy in place before you are approved for a loan.
You should consider building insurance even if your business premises are owned. This will cover you for the cost of any repairs or rebuilding.
You are responsible for the buildings insurance of your rental business premises. However, you might consider contents insurance to protect your stock or equipment.
Your business premises should be insured against the costs of rebuilding them, and not against their current market value or sale price.
The majority of building insurance policies won’t cover you for
General wear and tear – everyday things that can happen to your property over the course of time, such as carpets becoming thin
Acts of war and terrorism – Buildings insurance policies typically exclude damage due to terrorism. However, specialist insurers may be able to provide coverage for commercial properties for an additional fee. The Pool Re scheme provides funding that is government-backed to protect business owners against damage from terrorist acts.
To learn more, speak to a broker from the British Insurance Brokers Association (BIBA).
Contents insurance pays for the replacement of your stock and equipment in case it is stolen or damaged.
Valuing your stock & equipment
Stock should be insured against the cost of its purchase price, not its selling price, if you take out contents insurance. You should ensure that your insurance covers stock when it is necessary to store more stock than usual, such as during Christmas.
Two types of contents insurance policies are available for business equipment.
Replacement as part of new policies Replace an item that is stolen or damaged beyond repair by a new one
Indemnity policies take wear and tear into consideration, so your item will be replaced at its current value. If you file a claim, your insurer will pay the lesser amount. For instance, if an item you purchased in 2010 is worth PS1,500, but it was valued at PS1,000 in 2012.
- Additional coverage
If you are unable to do business as usual due to damage or loss to your equipment or premises, you can get business interruption insurance. This is often an additional when you purchase contents or buildings insurance. It covers:
- Any shortfall in pretax profits that results from the event
Any increased costs associated with running your business, such as additional accountant fees, may be a result.