who pays for insurance on commercial property
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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 buildings insurance.

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 commercial property owner.

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 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 property insurance works by the initiation of a claim by the property owner. After this, the claim is then reviewed and decided upon by the insurers handling the claim. The timing for the settling of a buildings 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

Generally, buildings insurance claims can be handled quickly. As long as the commercial landlord insurance policy covers the contents of the claim, we will handle all claims for you, and you can also submit a new claim notification on our website here.

If the claim is an emergency and outside of our working hours then you will find your insurer’s claim number in your policy documents that have been emailed to you.

Are Tenants Responsible for Buildings Insurance?

The simple answer is no. A tenant has no insurable interest in the value of the Buildings, and therefore it is not correct for the tenant to arrange buildings insurance on behalf of the Landlord/Freeholder.

A commercial tenant may be liable to reimburse the premium to the Landlord/Freeholder in accordance with the terms of the lease agreement, but not a residential tenant.

A liability insurance policy can be taken out of the landlord to ensure that they are free from responsibility should a tenant or renting business owner injure themselves while on the property. This kind of policy is a way to provide cover for the owner with legal protection.

As mentioned, any sort of rental agreement is commonly understood to be a trade-off between business owners and renters. The buildings insurance will protect the landlord’s assets and belongings insurance exists to safeguard the renter’s assets.

Belongings insurance covers any contents owned by the third party only. A landlord’s belongings insurance would cover only their contents on the premises, and the same can be said for a tenant’s belongings insurance.

It cannot be stressed enough how important contents insurance is for both parties since buildings insurance is very well-defined as only protection for the property.

Does a Commercial Tenant Pay Insurance?

Yes, but only where the terms of the lease require them to do so. They may only remit the insurance premiums to the Landlord/Freeholder, but they do not/should not arrange the Policy on their behalf.

Does a Commercial Tenant Pay Belongings Insurance?

Yes, renters will have to ensure their belongings and contents are covered according to what is or isn’t defined in the lease. It is important to always consult the lease when in doubt.

The property is generally not the renter’s responsibility as they are business owners under the rules and regulations of a lease, therefore, granted these regulations are abided regarding the property, the contents of the third party inside the property are the tenant’s sole responsibility, not the property owner’s.

What Insurance Do You Need for Commercial Property?

Typically a Commercial Property Owner will need to insure for the following:

  • Property Damage: The reinstatement cost of the buildings.
  • 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 following an insured peril (fire, flood, etc) rather than nonpayment 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.
  • Terrorism: Optional, or as stipulated in the lease.
  • Contents of communal areas: in the case of a block of flats, for example.

Will Buildings Insurance Cover Business Insurance?

Business insurance is a type of insurance that is distinct from buildings insurance just as home insurance or auto insurance is also a distinct and separate type of insurance.

A business is not a building, and generally speaking, there are no structural types of physical damage that can come to a business entity.

Business insurance is meant to cover any type of risk businesses may incur, which can include matters related to internal business matters on the premises or an office, in addition to matters related to rent discrepancies, etc.

The building’s policy is an example of the structure and its well-being whereas the business policy would be independent of the owner’s purview and solely related to the business owner.

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?

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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