Commercial landlord insurance is a straightforward product sitting on top of a complicated document. The lease has already decided most of what the policy has to do, and a landlord who reads it first makes three decisions quickly that would otherwise take weeks: who insures what, how the tenant's trade is described, and how long the building may stand empty.
Decision one: what the lease allocates
Full repairing and insuring means the tenant repairs and reimburses the premium while the landlord insures. Internal repairing splits it. A licence may do neither. Read the insurance covenant, the repair covenant and the rent suspension clause together: between them they say what you must insure, what you may recover and what happens to rent while the building is unusable.
Decision two: how the trade is described
The tenant's business is the main rating factor, and describing it accurately is not optional. An office, a shop, a restaurant with a fryer, a workshop with hot work and a unit storing stock are five different risks. Where a unit is relet, the new trade must be notified, because the policy was priced for the previous one.
Decision three: the void allowance
Commercial units are empty between tenancies as a matter of course, and the unoccupancy allowance decides whether that is routine or a problem. Commercial property owners wordings usually offer longer allowances than residential ones, and buying the longer allowance costs less than arranging unoccupied cover every time a lease ends.
What follows once those three are settled
The sum insured from a reinstatement assessment. The loss of rent period, which on commercial property should reflect a realistic rebuild including planning and fit out, often two or three years. The liability limit for the parts you retain. And whether terrorism is required, which on commercial buildings lenders frequently expect.
Questions people ask about commercial landlord insurance
Who insures a commercial let, landlord or tenant?
Usually the landlord, recovering the premium under the lease. Some leases put the obligation on the tenant. Read the insurance covenant first.
Does the tenant's business affect the premium?
It is the main rating factor. Cooking, hot work, spraying, chemicals and late hours all move the price, and some insurers decline trades others specialise in.
How long can a commercial unit be empty?
Within the policy's unoccupancy allowance, which is usually longer on commercial wordings. Beyond it, cover narrows and the insurer must be told.
How long should loss of rent run?
Long enough for a realistic rebuild including planning and fit out, which on commercial property is frequently two or three years.