The aim of the police is to ensure that the cost of rebuilding the premises is always covered and that the objects and people there are protected. While not a legal requirement, it is an essential guarantee for a business to operate and survive many crises.
In addition to building insurance, a commercial property insurance The policy package also includes contents insurance for those who need it and homeowner’s liability insurance to ensure accidents do not result in unnecessary and unforeseen costs.
What does a commercial property insurance policy cover?
While building, contents, and third party liability insurance is generally standard in most policies, there are a number of additional extras that can provide peace of mind for some homeowners and tenants.
Insurance of the building: It is the responsibility of the owner and not of the tenant. Although some landlords require the tenant to cover the cost of this as part of their contract. It covers the cost of repairing damage to the property itself and anything permanently attached to it. This includes roofs, parking lots, doors, windows, permanent flooring and fitted furniture such as kitchens and bathrooms. Carpets and blinds are not covered by building insurance, this would fall under contents insurance. The Financial mediator has more details on the items that fall under the contents and buildings insurance.
Contents Insurance: Covers the cost of repairing or replacing items damaged due to a number of scenarios such as fire, flood, storm, theft or vandalism. The owner of the objects is responsible for their insurance, so a renter cannot claim an owner’s contents insurance for damage to their own objects and vice versa. Homeowners do not always purchase contents insurance, but may choose to do so if they have expensive items inside the property.
Landlord Liability: If a tenant, their staff or another third party is injured in the property or sees their property damaged, this pays compensation and legal fees if the landlord is found guilty. It is a must have for homeowners and owner occupiers. Tenant liability insurance is purchased as part of business insurance packages to cover injury or damaged property of others if members of the public visit premises, such as a store or pub. Injuries suffered by personnel would fall under the legal obligation Employers’ liability insurance.
Insurance for leasehold improvements: Sometimes a tenant changes commercial property to meet their needs. For example, reconfigure a space to secure Covid zones. This insurance covers the cost of work carried out which, if carried out by an owner, would be covered by the building or contents insurance.
Business Interruption Insurance: For tenants who lose income or have additional charges due to a listed incident that prevents them from doing business from the premises. For example, a fire ravages a warehouse, destroying stock and preventing the company from selling its goods. While the inventory would be covered by content insurance, loss of revenue due to the unusability of the premises would be covered by the business interruption. It also covers additional costs incurred to get the business up and running, such as higher fees to expedite the delivery of replacement stock.
Rental Guarantee Insurance: For homeowners who want to make sure they don’t run out of income if a tenant doesn’t pay their rent. This is usually for a period defined as six or 12 months at the most.
Loss of rental income: If a listed incident such as a fire or flood means that a property is not usable and a tenant cannot be required to pay rent, this covers the rental costs that an owner would have collected if the premises had been occupied.
Accidental Damage: For owners or tenants for unintentional and unintentional damage.
Malicious damage by tenants: While malicious damage by third parties is generally included in building and contents insurance, malicious damage by tenants is not as expected to be legally permitted on places. This covers illegal and intentional damage caused by tenants.
Legal costs: whether a landlord has to take legal action or has to cover defense costs.
Who pays building insurance for commercial property?
The building owner is responsible for paying the building insurance. However, some landlords require the tenant to cover the cost of this as part of their contract.
The homeowner or homeowner will generally need building insurance if they have a mortgage on the property. It is also prudent to take out building insurance as it will cover the cost of completely rebuilding the property in the event of destruction. It would cost hundreds of thousands of pounds or even millions depending on the size and requirements of the premises.
Is VAT payable on commercial property insurance?
VAT is not payable on insurance of commercial property and other insurance products, the government says. It is also a tax deductible business expense, the government says. As long as the expense is “wholly and exclusively” for business purposes, it may be charged against taxable income.
However, the insurance is subject to a Insurance premium tax (IPT), which is currently set at 12%.
Can an unoccupied commercial property be insured for civil liability?
Unoccupied commercial properties require slightly different insurance because they come with additional risks, such as squatters or a higher risk of arson or flood damage. If a property is left unoccupied for a set period of time (typically more than 30 days), an insurer may require a homeowner to replace their policy with an unoccupied property insurance product.
Liability insurance is available on some of these policies, but some insurers do not offer unoccupied property insurance at all. Using an insurance broker is probably the best first step in this scenario.