Commercial Property Insurance - Knowing Which Policies Are Right For You

If you have decided to make a living out of buying and letting commercial properties, making sure that you are properly insured is essential. If you apply for a commercial mortgage to purchase retail, office, factory or warehouse space accessing the correct property insurance is a vital part of the commercial property process. In the same way that you would make sure you had the correct insurance policies on your home, it is crucial that you protect your commercial property business against a range of potential risks.

Specialised commercial property insurance, created to cover the needs of properties designed for business, not homes, gives you the peace of mind, knowing that your investment is protected. Whatever the nature of the business, commercial property insurance can be created to suit it.

Whatever kind of commercial asset it is that you have purchased, you must to ensure that it is fully protected against the main risks such as flood, fire, storm damage, criminal damage or earthquake. The property alone must be insured against these various perils; as it is unlikely that a mortgage lender will even consider offering you a loan without it.

This is obviously going to soon add up into serious money, so how is it generally worked out? It all depends on the size of your commercial property and what it is being used/the businesses that are tenants. Insurers are going to more open and happy to insure if it is an office block as it will be cheaper to cover. A manufacturer of factory is going to be more expensive as there will be a lot of expensive and specific machinery to be replaced if disaster strikes. Again, if you are in a black spot for flooding expect premium rates to be much higher.

As a commercial landlord, you may be reliant on the rental income you receive in order to meet your monthly commercial mortgage payments. So, including 'loss of rent' cover on your policy may be advisable. If the property were to be rendered uninhabitable (for example through fire or flood) then you could well lose the rental income on which you rely.

The small print of loss of rent cover bears looking into, you will find it will only last for one year from activation and is a pre agreed amount of the building value that will be paid out over this time. The typical value amount covered under loss of rent is 15%, but can change from lender to lender. The main purpose is to cover lost rent which you would most likely be relying on to pay the mortgage, so it is a very valuable addition to have on your insurance policy.

These days, commercial property insurance also includes a wide range of other options which you can tailor to your specific needs. One of the most common 'add ons' is commercial contents cover. If you have provided some or all of the contents of a commercial property, you may want to ensure that this is covered in the event of theft, flood or fire.

In addition to this, you can add extra cover for 'property owners liability' (this offers cover if a third party or their property is damaged by your property for example a wall collapsing or a tile falling from the roof) or 'legal expenses cover' which pays for the cost of legal fees if you need to go to court in a matter relating to the commercial property.

Owners of commercial property who neglect to adequately insure their businesses do so at their peril. The current unstable economy is highly likely to leave landlords with at least part of the year where there are no tenants, and it is impossible to predict whether or not there might be damage to the property in the future.

That said, accessing the proper insurance policy is not difficult. The soundest strategy is to consult an insurance broker. Most Brokers will have a wide range of cover policies and be able to create a tailored insurance policy for your particular needs.