Commercial Property Insurance Considerations in Australia
Commercial property insurance can help your business recover after a destructive event. Disasters can strike with little or no warning, leaving commercial buildings devastated. Within a matter of minutes, the business property you lease, or have worked so hard to call your own, could be severely damaged from heavy winds, electrical damage, storms, or fire.
Construction costs are escalating due to the global demands of materials and workforce. The cost to rebuild may be significantly higher today than just a year ago. Additionally, many commercial property owners have cutting-edge and expensive equipment and supplies at risk.
After a serious event, you may face a substantial loss of income as you rebuild. While commercial property insurance can help you repair your building, other types of business insurance can protect your income. We discuss these below.
Commercial property insurance is called business property or commercial building insurance. A sufficient policy offers coverage that protects business owners from damage or loss of essential business equipment, as well as damage to the commercial building. This coverage helps protect the business from significant loss due to a weather disaster, fire, or theft.
Why Buy a Commercial Property Insurance Policy?
The purpose of commercial property insurance is to cover the loss or damage to buildings, property, and contents. A commercial property insurance policy can help keep your business afloat when an unexpected loss occurs. Dollar-for-dollar, a commercial property policy is one of the best investments you can make in your business.
Here are a few of the most important reasons why business owners buy a commercial property insurance policy.Coverage for Your Commercial Building and Contents
If a covered event damages your business property or the contents, this insurance coverage can help pay for the repair or replacement of these assets. Additionally, if you are a tradie, material theft is a significant risk as timber and other costs increase.Peace of Mind
You have peace of mind when you know you have protected your commercial building and equipment from sudden damage, accidents, or theft. When disaster strikes, you are well prepared to withstand even a significant loss.Specific Coverage for Business Property
For sole traders who run their enterprises from home, a commercial property insurance policy offers coverage that you will not find in your traditional home insurance policy.
What Does Your Commercial Property Insurance Cover?
While all insurance companies provide somewhat different coverage options, many providers can include the following.
- Loss or damage to your property at your business location
- Loss of or damage to contents inside the commercial building; including fixtures, tenant improvements, and fittings
- Damage arising from falling trees, falling building fragments such as disintegrating brickwork, or damage from nearby construction
- Water damage arising from unexpected leaks
- Accidental damage to the property such as a vehicle driving into your office building
- Machinery breakdown, available as an additional option, including cover for the breakdown of industrial machinery and office equipment
While standard commercial property insurance covers damage caused by fire and accidental damage to buildings, contents, and when included, stock, it does not include loss of income from business interruption.
Many business owners also purchase business interruption insurance to protect against lost income after a covered loss. They may buy protection via a tailored business insurance pack, or a “biz pack.” This comprehensive policy can bundle the following.
- Commercial property
- Theft of money or certain other money losses
- Product liability
- Public liability
It is important to understand that water damage may or may not be covered. Please check your policy carefully. A SMART Business Insurance broker can help you obtain the specific coverage you seek.
What is Covered Under Commercial Property Insurance?*
You typically can select coverage for theft under a commercial property insurance “biz pack.” Generally, insurance companies will pay for loss or damage to the contents of the building and company inventory due to theft, attempted theft, armed hold-up, or vandalism. Many commercial property insurance policies will also allow you to cover damage to glass or signs, which often occurs during vandalism or a break-in.
Events that a commercial property policy may cover include the following*
- Goods damaged in transit
- Storm, wind, and rain which can consist of snow, sleet or hail
- Wind or water
How Much Commercial Property Insurance Do I Need?
When trying to determine how much coverage you need for your business location, keep in mind that insurers design this type of policy to restore your company to the same financial state as before the damage occurred. That means being able to rebuild and replace the buildings and contents at today's prices without depreciation for wear and tear. This is known as replacement cost coverage. Businesses with highly customised or specialised property will typically mean greater replacement costs.
Insurance coverage can vary significantly from one company to the next. When purchasing a business policy for the first time, know that exclusions exist in all property policies. Exclusions carve out coverage and can create unexpected out-of-pocket expenses if not fully understood. Therefore, it is important to consult with an insurance broker before you make a final decision on your company’s new or renewal insurance policy.
To learn more about commercial property insurance, contact our insurance brokers today. Our licensed professionals will be happy to answer your questions.
What Factors Influence Commercial Property Insurance Premiums?
Several key factors influence commercial property insurance rates, including the following.
- Age of commercial property - When was your commercial property built? The newer the commercial space, the more affordable the insurance rates. If your commercial property is older, has it been rewired? Electrical wiring in older commercial buildings can cause fire losses. Insurers are wary of unmodernized electrical. Aging wiring can mean underwriting rejections and higher premiums for the property owner and tenants. A SMART business insurance broker may be able to help.
- Business equipment - What type of business equipment do you use? Large-scale plant machinery or specialty high-tech equipment can be expensive and difficult to replace. These types of equipment will increase your commercial property insurance premiums. Older, outdated equipment also may be expensive to insure because it may be difficult to locate parts.
- Claim severity and claim frequency - Claim severity is how much a claim costs the insurer. Claim frequency is how often claims occur. Does your commercial business use flammable or dangerous materials? Are thefts a frequent occurrence for your materials or finished products? Is your commercial property located in a high-crime area? The questions above illustrate problems that often cause increases in severity or frequency or both. Claims frequency and typical claims costs for similar properties impact the cost of your commercial property insurance.
- Location - Far North Queensland commercial properties face significant natural hazards and are relatively expensive to insure. In some cases, insurers will not extend coverage. Any locations in Australia where commercial properties have had a high number of claims are relatively expensive to insure.
- Security - What type of security measures do you use in your commercial property? Closed-circuit television, a monitored alarm, security patrols, deadlocks, and reinforced entry points improve your security profile. The higher the security measures at your commercial property, the lower your premiums.
- Size - Generally, the larger the factory, retail space, or office space, the higher the insurance premium. Conversely, if your business operates from a location with little specialised equipment, the cost of your cover may be relatively low.
- Fitout - How much would it cost and how difficult would it be to replicate your fitout? Intricate buildouts or custom rig out can increase property insurance premiums.
- Sprinklers - If your goods are flammable and your property values high, sprinklers may help you obtain suitable cover at a reasonable price.
- Stock - What is the value of your stock? If you have little or no stock, this will reduce the cost of commercial property insurance. The amount of stock the insurer covers will impact costs. Is your stock highly flammable? Also, consider seasonal stock swings. For example, a toy seller has additional products during holiday seasons.
- Total sums insured - The total values of buildings, stock, machinery, and finished goods will impact the cost of commercial property insurance.
Many factors influence the cost of commercial property insurance. Not sure how much coverage you need? Call 1300 542 573 and talk to a SMART Business Insurance broker who may be able to assist you in finding suitable cover at an affordable cost.
Commercial Property Insurance Quotes for Offices, Factories, Warehouses, and Retail Shops
Whether your business property is a factory, warehouse, or office building, our team of Smart Business Insurance brokers can provide you with multiple quotes for suitable policies from leading insurance companies.
For a property insurance quote for your commercial business property needs, talk to a Smart Business Insurance broker on 1300 542 573 or enquire online.
Important: Cover may be available subject only to meeting the insurer’s underwriting criteria. Some of the covers listed may or may not be available or may have limitations or exclusions. Cover inclusions vary significantly from insurer to insurer. DO NOT rely upon the above. Check your policy schedule carefully for inclusions and exclusions and limitations. Talk to a SMART Business Insurance broker on 1300 542 573 for more information.
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What is the correct "Situation Address" to list on my business policy.?
The Situation Address must be the address of either the physical risk being covered (like a property) or, in the case of Liability policies, the physical address for the normal place (or places) of business.
If you have multiple business locations, e.g., a number of branches, shops, factories or depots, then ALL location addresses must be shown on the schedule and advised to the insurers. And the multiple location addresses then needs to be kept up to date with the insurers at all times, in the event of any changes.
Insurers will not accept a Post Office box as a "normal place of business", because you cannot do business from a PO Box.
A PO Box is fine for a mailing address, but cannot be used as the address of the "Situation" on any policy.
For example, Public Liability policies usually operate "at and from" an address, which should be the normal place of business for a business policy.
If the business was run from home, for example, then the home address would be shown as the normal place of business. The "at and from" nature of the cover would then cover any transitory business conducted away from the home address (or away from a real business address, as the case may be).
If the business was run from home but was selling through stands or kiosks at markets or shopping centres then that would have to be disclosed to the insurer, as it affects the risk.
The team at Smart Business Insurance tendered for our Corporate insurance cover including building, travel. They offered very competitive quotes and have continued to do so year after year. The staff are always efficient and friendly and I would not hesitate to recommend them. Well done Smart!
Kind regardsErwin Tan
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