Commercial property insurance
There are two types of commercial property insurance:
- buildings insurance
- contents insurance
Buildings insurance covers the cost of repairing or rebuilding your business premises if damaged or destroyed.
Buildings insurance is not required by law, but most mortgage providers will insist that you take out a policy before they give you a loan.
Even if you own your business premises outright you should still consider buildings insurance to cover you against the cost of repairs or rebuilding your property.
If you rent your business premises, buildings insurance is your landlord's responsibility – but you may consider taking out contents insurance to protect your stock and equipment.
You should always insure your business premises against the cost of rebuilding the property, not against its sale price or current market value.
Most building insurance policies will not cover you for:
- general wear and tear – everyday things that happen to your property over time such as carpets wearing thin
- acts of war or terrorism – buildings insurance policies usually exclude damage caused by terrorism, but specialist insurers can provide cover for commercial properties for an additional premium. Cover for terrorism is supported by the Pool Re scheme, which provides government-backed funding to ensure that business owners are protected against losses from damage caused by acts of terrorism.
Speak to a specialist broker through the British Insurance Brokers’ Association (BIBA) to find out more.
Contents insurance covers the cost of replacing your business’s stock or equipment if it is damaged or stolen.
Valuing your stock and equipment
If you are taking out contents insurance you should insure stock against its cost price, not its sale price. If there are times when you have more stock on your premises than usual, for example in the run-up to Christmas, you should make sure your insurance covers this.
There are two types of contents insurance policy for business equipment:
- replacement as new policies replace an item that has been stolen or damaged beyond repair with a new one
- indemnity polices take wear and tear into account, replacing your items at their current value. For example, if you bought an item in 2010 for £1,500 and it’s valued at £1,000 in 2012, your insurer will pay out the lower amount if you make a claim
Business interruption insurance covers you if you cannot do business as normal as a result of an event that causes damage to your premises or equipment. It is usually offered as an extra when you buy buildings or contents insurance. It covers:
- any shortfall in pre-tax profits resulting from the event
- any increased costs in running your business as a result of the event, such as extra accountants’ fees