Commercial property owners insurance covers a building let to businesses, and it is the lease rather than the policy that decides who carries what. A full repairing and insuring lease pushes repair onto the tenant and insurance onto the landlord with a recharge. Other leases split it differently. Buying this cover without reading the lease is the commonest way to end up insuring a risk somebody else already agreed to carry, or failing to insure one you promised to.
The lease sets the specification
Read the insurance covenant first. It will say who insures, against what perils, for what sum, whose interests are noted, and how the premium is recovered. It will usually also say what happens to rent if the building is damaged, which is the rent suspension clause and the reason the loss of rent section exists. The policy is then bought to match, not chosen and hoped to fit.
Occupancy drives the price
The trade in the unit is the dominant rating factor. Food preparation, hot work, spraying, woodworking, chemicals, late hours and heavy public footfall all move the premium, and some insurers decline trades others specialise in. A change of tenant is therefore a change of risk that most policies require you to notify, and a unit relet from an office to a takeaway without telling the insurer is a claim waiting to be argued.
Voids, which are normal rather than exceptional
Commercial units sit empty between tenancies routinely, and the unoccupancy clause applies exactly as it does to a house. Commercial property owners wordings usually offer a longer void allowance, and buying the longer one is cheaper than hoping. Empty units also attract rates liability and are a target for metal theft, so the security conditions in the wording deserve a careful read.
Loss of rent over a realistic period
Commercial reinstatement is slow: planning, specification, procurement and fit out all add months that a residential rebuild does not have. A twelve month loss of rent period is usually too short, and two or three years is common. The number should be the annual rent roll multiplied by a period you could defend to a surveyor, not the figure a comparison form defaulted to.
Questions people ask about commercial property owners insurance
Who insures a commercial building, the landlord or the tenant?
Usually the landlord under the lease, recovering the premium from the tenant. Some leases put the obligation on the tenant. The lease is definitive.
What is a rent suspension clause?
It suspends the tenant's rent while the building is unusable after an insured event. It is the reason a landlord needs loss of rent cover, and the period it runs for should match the policy.
Can I insure a mixed use building?
Yes, but not with every insurer, and the commercial use usually drives the rating. A flat above a restaurant is priced on the restaurant.
Do I have to tell the insurer when the tenant changes?
Yes, in almost every wording. Occupancy is the main rating factor and a new trade is a new risk.