Buildings insurance is vital for all businesses. If your business premises are not insured, then you may struggle to operate following fires, floods, and other incidents.
Yet who is responsible for arranging and paying for building insurance on commercial properties?
Whether you are a business owner, a leaseholder, or a freeholder, it can be confusing to determine your exact responsibilities when it comes to building insurance. So, in this post, we will answer some of the key questions that you might have regarding building insurance on commercial properties.
Who is Responsible For Arranging Building Insurance on Commercial Properties?
Apart from a few exceptions, the responsibility for arranging building insurance falls upon whomever legally owns the commercial property. If you are an owner-occupier, meaning your business owns your premises outright, then you will be responsible for arranging your building insurance, and paying for it, alongside the rest of your business insurance.
Who Is Responsible for Building Insurance if you Rent your Business Premises?
What if your business is just one of a number of businesses to rent space in the same building? In this case, more often than not, the building’s owner, freeholder, or landlord will be responsible for ensuring there is adequate building insurance in place to cover their occupants against all possible risks.
In some instances, the terms of the lease may stipulate that the head lessee is responsible for arranging building insurance, rather than the freeholder, subject to the freeholder’s interest being noted on the policy.
Who is Responsible for Paying For Building Insurance on Commercial Properties?
The property owner, freeholder, or landlord will not necessarily pay for the insurance they arrange. They may instead choose to pass on the cost of cover to their tenants as part of their commercial lease agreement.
So, if you are a business owner renting your premises, you may still have to pay for buildings insurance, even if you are not responsible for arranging it yourself.
If you are the sole business occupying the premises, then you will pay for all of the cover. But if you are one of several businesses occupying the premises, then you will likely only pay for a proportion of the cover.
What Does Commercial Building Insurance Cover?
In a commercial property, building insurance will cover the property’s internal and external structure, including all windows, doors, plumbing, electricals, stairwells, and so on. Typically, the insurance will provide cover for property damage – for any necessary repairs following fire, flood, subsistence, break-ins, and so on.
The commercial property insurance will typically not cover the building’s contents. So, if you are leasing office or warehouse space in a commercial property, you will almost certainly have to arrange for your own separate contents insurance policy, to cover your stock and equipment.
You will also have to arrange for certain additional forms of business insurance. This might include business interruption insurance, employer’s liability insurance, cyber insurance, and whatever else is necessary to cover your business for the various risks you face while conducting business.
How Does Commercial Property Insurance Work When Making a Claim?
Consider the following example: There is a fire at the commercial property where your business is based. It causes significant damage, so it becomes necessary to make an insurance claim.
Whomever legally owns the building, whether this is an owner-occupier, or a third party landlord or freeholder, will be responsible for making a claim on the building insurance policy. This will cover the necessary repairs for any damage to the building’s structure, or its permanent fixtures and fittings.
Yet any businesses based in the building will have to make separate claims on their own policies to get the cover they need for destroyed or damaged stock or equipment, for business interruption, for loss of income, for temporary relocation, and so on.
This is why it is important that everyone involved in a commercial property leasing agreement fully understands their responsibilities in regard to insurance, and the steps they will need to take in the event of a claim.
Insurance claims in commercial properties can get complicated. But with good communication between tenants, freeholders, leaseholders, insurers, loss adjusters, and whomever else is involved in the claim, the process can proceed as smoothly as possible.
Have You Got The Right Cover For Your Business or Commercial Property?
Whether you are a landlord, a leaseholder, a freeholder, or an owner-operator, we can help you make sure you have the right cover in place for your commercial property. As well as advising on your buildings insurance, we can also advise on the additional cover you might need to ensure you meet you are fully compliant and fully protected.
Find out more about our Real Estate Insurance and get in touch for a free quote today.