who pays for insurance on commercial property

Commercial property insurance can be a confusing concept for many. The property owner, any third parties or tenants, even an insurance broker, all fall under the various parameters of a building’s insurance. But at the end of the day, there is truly only one overseer and responsible party when it comes to arranging the buildings insurance for the property.

When it comes to commercial properties, commercial property insurance or, landlord insurance as it is also known, it is almost always the responsibility of the actual commercial property owner (the person who legally owns the property and therefore has what is known as an ‘insurable interest’).

We know this can still be a complicated subject to fully grasp, therefore, in this guide, we will explore all the details surrounding building insurance for commercial properties. We will discuss who is responsible for paying this insurance, as well as answer some frequently asked questions that come along with this question.

Who Pays Building Insurance for Commercial Property?

In standard commercial lease agreements, it is common for the Freeholder/Landlord/Owner to recharge the tenant for the cost of the building’s insurance in which they occupy (or proportion of, if there are multiple tenants).

However, it remains the responsibility of the Freeholder/Landlord/Owner to arrange the Policy as the ‘Insured Party’ in order to ensure that the cover is sufficient for their requirements and protect their interests.

Essentially, anything that is not bolted into the design of the building, such as fixtures and fittings (typically tenant fixtures and fittings), or anything that is not otherwise specified in a landlord and tenant agreement, does not fall under the buildings insurance agreement.

If you have a tenancy within a building on a commercial property, you will need to get contents insurance to cover your personal belongings since the buildings insurance will only cover any specified damages to the building itself, which can go so far as to include any kitchens or bathrooms and malfunctions within those types of rooms.

How Does Commercial Property Insurance Work?

Commercial properties have different risks to residential properties and therefore require a different policy. General cover can include damage to buildings, landlords contents, property owners liability, employers liability and business interruption cover.  An insurance broker will ask you the relevant questions to establish exactly what elements of cover you need.

A commercial property insurance policy ‘works’ by the initiation of a claim by the property owner or named policy holder. After this, the claim is then reviewed and decided upon by the insurers handling the claim. The timing for the settling of an insurance claim all depends on what type of claim it is, the size of the claim, and who the insurer is.

There are various steps involved in the process, but generally, you can expect the process to follow these points:

  1. Obtaining the claims information from the client
  2. Logging the claim with the insurer
  3. Obtaining 2 or more estimates if repairs are required
  4. Seeking information from any other parties if applicable
  5. Attending any loss adjuster meetings
  6. Awaiting loss adjuster reports
  7. Insurer reviews all information and confirms settlement

Generally, buildings insurance claims can be handled quickly. Liability claims usually take longer depending on the nature of any injuries and the legalities involved.

At Glowsure, we will handle all claims for you which include all the steps listed above so you can just make one call to us or you can also submit a new claim notification on our website here.

You can find more information on the claims process here: Insurance Claims | Support And Guidance | Glowsure

Are Tenants Responsible for Buildings Insurance?

The simple answer is no. A tenant has no insurable interest in the value of the Buildings and should not arrange a Buildings insurance policy. It is the responsibility of the Landlord/Freeholder/Property Owner.

A commercial tenant IS however responsible for arranging their own business insurance including cover for any of their own business contents, fixtures or fittings within the commercial property they rent.

It cannot be stressed enough how important contents insurance is for both parties (Landlord/Freeholder/Property Owner & the commercial tenant that rents the property) since buildings insurance is very well-defined as only protection for the property.

Does a Commercial Tenant Pay for Buildings Insurance?

Yes, but only where the terms of the lease require them to do so. To reiterate, the commercial tenant should not actually arrange the buildings insurance policy – this is the responsibility of the Landlord/Freeholder/Property Owner. However, under most commercial leases this cost will be recharged to the commercial tenant to reimburse.

Does a Commercial Tenant Pay Contents Insurance?

Yes, commercial tenants renting or leasing a property will have to arrange and pay for their own belongings and contents insurance (including any fixtures, fittings, or improvements they have added). They should ensure they are covered according to what is or isn’t defined in the lease. It is important to always consult the lease if in doubt. 

What Insurance Do You Need for Commercial Property?

  • Property Damage: The reinstatement cost of the buildings for physical or accidental damage to the property
  • Loss of Rent: Typically for a 36 month indemnity period). Note this is loss of rental income in the event that the property is uninhabitable, and the tenant has to move out following an insured peril (fire, flood, etc) rather than non-payment or periods without tenants.
  • Property Owners Liability: Covers against claims made against the owner for any injury/damage to Third Parties arising out of alleged defects in the property or maintenance thereof.
  • Employers Liability: If you employ a maintenance person to deal with your properties
  • Terrorism: Optional, or as stipulated in the lease.
  • Contents: If you have any contents within the property or communal contents in the case of a block of flats, for example.

You can find out more information here: Commercial Property Insurance Brokers | Glowsure Business Insurance

Will Buildings Insurance Cover Business Insurance?

Buildings insurance and Business insurance are two distinct types of insurance, (although if you own the premises and you operate your business from it you can incorporate the two elements in a combined policy which your insurance broker can advise you about).

Business buildings insurance provides cover for the building you run your business from should it suffer any damage or is destroyed. Any claims settlement will be paid to the policy holder (Freeholder/Landlord/Property Owner) and not the tenant.

Business insurance relates to specific risks/threats in connection to actual business activity and can provide cover for the cost of legal claims, repairs, lost equipment, jobs gone bad, injuries or lost earnings to name a few.

Contact Glowsure for Commercial Property Insurance

At Glowsure, we strive to ensure that property owners have all of their insurance needs met with friendly and superior service. We are proud to have established a business that puts customers front and centre, and if something is not right, we fix it.

Being a close team makes us agile and able to respond quickly to a client’s needs. If you are needing commercial buildings insurance or, if you just have some questions you would like answered, please feel free to contact us today at 01730 239387 or fill out our contact form for a free quote with no service charge.

You may also be interested in: What insurance do you need as a landlord?

Picture of Rebecca Haynes
Rebecca Haynes
Rebecca is the Operations Manager at Glowsure and a self confessed insurance nerd. She helps businesses and landlords to retain income and continue trading in the event of a claim.
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