A Guide To Choosing The Right Commercial Property Insurance Policies From the Dozens Available

When you take out a commercial mortgage to buy a shop, office, factory or warehouse, getting the right property insurance is a key part of the buying process.  Just as you make sure you have the right buildings and contents insurance on your home, it is important that you protect your commercial property against a range of possible risks.

Specialist commercial property insurance can give you the peace of mind that you need.  Whether the property is a factory, shop or office, commercial property insurance can be tailored to your specific requirements.

Whatever type of property it is that you own, you need to be sure that it is protected against the major risks such as storm damage, fire, flood, malicious damage or earthquake.  The building itself should be insured against these various perils; indeed suitable and adequate insurance may be a condition of obtaining a commercial mortgage on the premises.

Factors that typically affect the premium for commercial property insurance include the value and type of property, whether the property is occupied, how it is occupied and the type of business that takes place on the premises.  For example, insurance for an office is likely to be cheaper than insurance for a factory or other manufacturing premises.  The location of the property is also a factor, particularly if it is situated in an area with a high risk of flooding.

One of the most common 'add-ons' that owners of commercial insurance add to their policy is 'loss of rent' cover.  If you are the landlord of a commercial property, you may well rely on the rental income generated by your tenants in order to pay your commercial mortgage.  However, if the building were to be rendered uninhabitable through fire or flood, you would potentially lose this income.

Loss of rent cover is typically a pre-determined percent of the buildings sum insured (typically around 15 per cent) and is often restricted to a 12 month period.  It is designed to compensate you for any loss of rent received if the building is unable to be let thanks to a risk covered under your commercial insurance policy.
Commercial property insurance also offers a wide array of additional types of cover that you can include.  For example, you may wish to include contents cover if you have provided furniture or other contents of the premises.  This would protect your contents against a range of risks including fire, flood and theft.

In addition, you can include additional cover such as 'property owners liability' (this provides cover should a third party or their property be damaged by the property - for example by a tile falling from the roof) or 'legal expenses cover' which covers the cost of legal fees should you have to go to court in a matter relating to your commercial property.

As a commercial property owner, insurance is important to ensure your business runs smoothly.  Unexpected problems can leave you without rental income and struggling to make ends meet if you don't have adequate cover.

However, finding the right insurance need not be difficult.  Many insurance brokers will have a wide range of cover options and be able to tailor a bespoke insurance policy for your particular property.
Howard O'Gollegos writes for Just Commercial Mortgages the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.