Commercial Property Insurance

What is a Commercial Property, and Why Protect it with Insurance? *

Commercial property is primarily used for business activities rather than personal living. Examples of commercial properties include office buildings, retail stores, industrial warehouses, and hotels. Commercial properties are usually bigger than residential properties and bring in money for the owner through rent or business operations.

What are the Different Types of Commercial Insurance Available? *

Several types of insurance policies are available for commercial property owners, each covering different aspects of the property and the business.

Property insurance is the most common type of insurance for commercial property owners. It may cover physical damage to the property caused by fire, theft, natural disasters, and other perils. In addition, the policy may cover the cost of repairs or replacement of the property, including buildings, fixtures, equipment, and inventory.

Public liability insurance is another important policy for commercial property owners. It covers the cost of legal claims against the property owner by third parties for injury or damage. For example, if a customer slips and falls on the property and sues the owner, public liability insurance may cover the legal fees and compensation.

Business interruption insurance is a policy that covers lost income and expenses if the property becomes unusable due to damage or specified other perils. It may also cover the cost of relocating the business temporarily. This policy is vital for companies that rely heavily on their physical location, such as retail stores, restaurants, and manufacturing plants.

Other types of insurance policies for commercial property owners may include equipment breakdown, flood, and cyber insurance. Property owners must carefully assess their risks and insurance needs and can consult with an experienced insurance professional for guidance on suitable policies for their property.

What Situations are Typically Covered by Commercial Property Insurance? *

Commercial property insurance typically covers a range of events and situations that can cause damage to the property or result in financial losses for the business. Some of the common events and situations that may be covered by commercial property insurance include:

1. Theft and vandalism: This policy covers property stolen or damaged during a break-in or theft incident.

2. Fire and perils and smoke damage: Commercial property insurance covers damages caused by fire or smoke, including repairing or replacing damaged property. It may also cover damage caused by flood and storms. Policy inclusions and exclusions vary so check with a SMART broker. 

3. Lawsuits from customers or employees: Commercial property insurance may cover legal expenses related to lawsuits filed against the business by customers or employees injured on or near the property.

4. Business interruption: In case of specified events such as storm, lightening, flood, burst pipes, and theft , business interruption coverage may help the business pay for expenses such as rent, salaries, utilities, and lost profits while the business cannot operate.

5. Equipment breakdown: This policy covers damage to equipment or machinery due to mechanical or electrical failures.

Commercial property owners must assess risks carefully and ensure adequate insurance coverage to protect their businesses from financial losses.

What can Affect the Cost of Commercial Insurance? *

Several factors may affect the cost of commercial property insurance, including the size and location of the property, the type of business, and the coverage needed. Larger properties and businesses in high-risk areas may have higher insurance costs due to increased risks. Certain types of businesses, such as those in the construction industry, may require more extensive coverage, leading to higher premiums. The level of coverage needed also plays a role in determining insurance costs. Businesses that require high levels of coverage, such as those with expensive equipment or high customer traffic, may face higher premiums. Factors such as the business’s claims history, and safety measures in place may also affect commercial building insurance costs.

Who pays building insurance on commercial property in Australia? *

In Australia, the payment of building insurance on a commercial property usually depends on the lease agreement (if leased). In some cases, the commercial property owner  takes out the insurance in their name and passes on the insurance cost to the tenant. Nevertheless, this may not be always the case, commercial property owners and tenants should check their lease agreements to know what they have to do. Commercial tenants may have to also be required to take out their own business insurance for business liability, property damage (contents and stock) and glass replacement.

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, & get office building insurance rates, 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 information for Commercial Property Owners: Vacant Property Risks*

As a commercial property owner you are aware that when your commercial property becomes vacant for an extended period your insurance could be voided? Or that a change in your tenant’s occupation can impact your premiums and in some cases even affect your insurer’s willingness to cover your property?

As all commercial property owners know, re-tenanting a commercial property that becomes vacant can take some time. Take a walk down Brunswick Street Fitzroy or Chapel Street South Yarra and even the casual observer will see the number of “for Lease” signs that signal the change in commercial fortunes.

While the financial loss of rent can be significant, property owners need to protect themselves against other unforseen risks once a property becomes vacant to avoid more potential losses.

Vandals and squatters often target empty shops, warehouses and factories because they see them as easy targets. Insurers are all too aware of this and rate unoccupied premises accordingly.

The increased risks associated with vacant property generally means an increase in premium and / or an increase in excess in the event of claim. This is a small price to pay relative to a claim being denied or your cover being significantly reduced because you did not inform your insurer if your property was untenanted for more than 90 days. If your property is untenanted for more than 90 days some insurers will not want to provide cover so it is critical you contact your broker in this event.

Property owners also need to inform their broker/ insurer if there is a change in tenant. When a property is rated for risk it is done so based on your declared tenant. From example if your tenant changes from a tile warehouse to a wood working business the risk of fire is greatly increased and hence your insurer will rerate your property with a likely increase in premium and/or changes to the insurance terms and conditions. Failure to notify your insurer of a change in tenant may void or significantly reduce your cover in the case of a claim.

In some extreme cases you may not even find an insurer who is willing to insure your property. For example Tattoo Parlours are notoriously difficult to insure due to the moral risk / associations with bikie gangs, even if your tenant has no association with any bikie gang.

Unfortunately these considerations are often overlooked leading to significant financial loss in the event of a claim for property owners who are not well advised.

If you would like to review your current commercial property insurance arrangements please call 1300 542 573 and speak to one of the SMART Business Insurance Commercial Property Specialists.

Although specific information has been prepared from sources believed to be reliable, we offer no guarantee as to its accuracy or completeness. The information stated, opinions expressed and estimates given constitute best judgement at the time of publication and are subject to change without notice to you. Consequently, although this document is provided in good faith, it is not intended to create any legal liability or advice on the part of SMART Business Insurance Pty Ltd.

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 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.