What is Commercial Property Owner’s Insurance?

A Commercial Property Owner’s insurance package is designed to protect the property from unforeseen events, and also to protect the property owner from the financial burden of such events.

Who should insure for Commercial Property Owner’s Insurance?

Commercial Property Insurance is designed to protect Property owners of buildings where they are occupied by commercial tenants.

What does Commercial Property Owner’s Insurance cover?

A Commercial Property Owner’s Insurance policy can cover the below:

Building & Contents
Repair and replacement after insured events

Cover for your items where there has been a theft, or attempted theft

Cover for claims brought against you for third party property damage or third party personal Injury

Machinery Breadkown
Covers the costs to repair or replace items with a motor that have broken down; such as aircons. Please note that depending on your tenancy agreement, the tenant may be responsible for this.

Loss of Rent/Business Interruption
Protects your rental income if there was damage to your property which deemed your property uninhabitable and the tenants were no longer obligated to pay rent

Cover for breakage to internal and external glass. Please note that depending on your tenancy agreement, the tenant may be responsible for this.

Does my tenancy listing impact my insurance premiums?

Your tenants are one of the biggest factors that will affect your insurance policy. If the occupancy has low risk tenants, such as an office, the premium is going to be quite low. If your tenants are deemed high risk, such as a wooden furniture manufacturing business, the premium is going to be high. As we are insuring the building for events such as fire, tenants that have a particularly high fire risk is going to attract higher insurance premiums.

Can I insure my rental income?

Under a Commercial Property Owner’s Insurance policy, you can opt to protect your rental income if your property suffered an unforeseen event which deemed your property uninhabitable, and your tenants were no longer contractually obligated to pay rent.

What events would my rental income be insured?

Under your insurance policy, this would be called “Business Interruption Insurance”. In layman’s terms, it’s more commonly referred to as Loss of Rent. If an event occurred which deemed your property uninhabitable by the insurer, the rental income that your tenant is no longer obligated to pay can be covered by your insurance policy.
Events that would prohibit your tenant from occupying your property could be a result from building damage from fire, weather events, malicious damage, accidental damage, impact, or escape of liquid. This is not an exhaustive list, however these are a list of the most common occurrences.

How long should I insure my rental income for?

Under the Business Interruption section, you have the option to insure for an Indemnity period of your choice. When choosing your indemnity period, you must always consider the worst case scenario. If your property was to burn down, and you had to rebuild it, how long would it take to accomplish this? You must also factor in unexpected delays such as council approvals, material, and labour shortages. All of these factors could extend the duration  to rebuild your property. 18 months is usually the minimum recommended period.

When should I update my insurance policy when there has been a tenancy change?

As soon as you have confirmed a new tenant that differs to the previous tenant listed on your insurance policy, you must notify your broker or insurer immediately as there could be changes to the conditions of your insurance policy.

Do I insure my gross annual rentals including GST?

On your insurance policy, you should include GST on your annual rental figure.

Does a Commercial Property Owner’s Insurance policy cover flood?

Flood insurance is not automatically included under a Commercial Property Owners Insurance policy. You have to request this from the insurer.

Does a Commercial Property Owner need Public Liability Insurance?

A Commercial Landlord has an obligation to their tenants to provide a safe, secure property. Failure to do so could potentially see persons injured. For example, a retail store may have a damaged section of flooring that is protruding near the front entry of the store which the commercial landlord has been informed about, yet has not rectified. This is a tripping hazard. The potential for a customer to be injured because of this is high. In this instance, the commercial landlord could be liable for the associated costs if a customer were to suffer an injury. This is because the commercial landlord had become aware of the hazard, yet had neglected to rectify it in a timely manner.
Public Liability Insurance, or more commonly referred to as “Property Owner’s Liability” in this instance, is crucial to protect the property owner from third party propery damage, or personal injury claims brought against them. This can include the tenants, or the tenants clients and customers that enter the premise.

What is not covered under a Commercial Property Owner’s Insurance policy?

The standard exclusions for a Commercial Property Owner’s Insurance policy can include the below:

Damage to the property that happened prior to the insurance being taken out
Flood cover is a standard exclusion, unless otherwise added and approved by the insurer
Wear, tear, deterioration
Maintenance issues
Actions of the Sea
Cover where cover sections have not been selected; for example – you cannot claim on glass breakage if you did not select to insure for glass cover

How much should I insure my Commercial Building for?

It is recommended that you seek professional advice from a builder, architect, surveryer or any other suitability qualified professional to determine an adequate building sum insured.

What happens if I under insure my building to reduce my insurance premiums?

As your Insurance premium is heavily weighted on how much your building is insured for, it could be tempting to insure for less, so your premium is lower. This is a particularly risky move, because unlike home insurance, commercial insurance policies have a “co-insurance” clause. As such, if you choose to insure for a lower amount than the true figure to rebuild your property, you could find yourself having to contribute to the cost to rebuild the property. A co-insurance clause is essentially a penalty for not insuring for an adequate value. Usually, you would need to be insured for at least 80% of the claim value before they start reducing your claim payment.

How can Morgan Insurance Brokers help?

Morgan Insurance Brokers are a team of professional Insurance Specialists that deal in Commercial Property Owner’s Insurance on a daily basis. This means that we are well versed with the risks that you are exposed to as a property owner. We are able to approach our panel of approved insurers to source and tailor an insurance package that is going to protect your property, and rental income for the years ahead.




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