Owners of commercial property fall into two broad categories:
- those who own the property as premises from which they are conducting their own business activities; and
- those who have invested in commercial property, which is then leased to tenants for the rental income it generates and any eventual capital gain on the sale of the property.
In either case, commercial property insurance is needed to protect the structure and fabric of the building against potential loss or damage and to safeguard the owner’s and occupier’s liabilities:
If you own commercial property
- if you are running your business from commercial property you own, your investment in the building and the very business itself depends on protection of its structure and fabric against a wide range of potentially serious risks – such as fire, storm damage, flooding, subsidence, impacts, theft and vandalism;
- the Investment Property Forum (IPF) suggests that commercial property is particularly vulnerable to environmental factors, such as the risk of flooding or of land contamination, both of which might lead to loss or damage to the fabric of the building;
- you also need to safeguard the equipment, plant, machinery and stock which form part of the contents of the premises and on which your business depends;
- as the owner of the property, you also have a general public liability for any injury or property damage sustained by any third party, who may claim substantial damages if you are found to have been negligent in your duty of care;
- if your commercial property is let to tenants, you also owe them a duty of care to prevent injury or property damage and your indemnity against such claims is secured by commercial landlord’s insurance;
- whether you are using the property yourself or have let it to tenants, if you employ others, you have a legal obligation to hold at least £5 million in employers’ liability insurance – to ensure that you are able to meet claims from any employee, current or past, who suffers an injury or contracts a longer-term medical condition because of the work they do for you;
If you lease commercial property
- although your landlord is likely to have taken responsibility for arranging building insurance, commercial property insurance is still likely to be your first line of defence for the contents – plant, machinery, equipment and most of the fittings – used by your business;
- although your landlord is also likely to have arranged property owner’s liability insurance against third party claims, your own use of the building may still leave you liable for claims made by visitors to the premises, neighbours or members of the public who suffer an injury or have their own property damaged as a result of your business practices – public liability indemnity cover of your own is, therefore, likely to be necessary;
- as the leaseholder of the premises from which you are running a business, if you employ any staff, then once again, you have a legal obligation to have a minimum of £5 million employers’ liability insurance to meet claims from employees past or present.
Whether you own or lease commercial property therefore you are almost certain to need commercial property insurance to protect loss or damage to your investment and any business you are running.