Commercial Property Insurance – a handy guide for tenants

Boxpod has teamed up with Abaco Insurance Brokers to produce a checklist to help ensure tenants have adequate cover when renting commercial premises. Make sure you’re properly protected.

Q What are the different types of insurance which tenants need when renting commercial property?

A If the landlord is insuring the buildings then tenants should cover only their own building improvements plus fixtures and fittings (this is in accordance with most leases). Additionally insure own property e.g. plant, machinery, office contents, stock including work in progress and finished goods, and any other contents whether permanent or temporary. There are many other policies that should be considered depending upon the trade or profession of the tenant and their activities. Phone a broker to see how best to cover not only assets but also financial loss, legal liability and business interruption risks.

Q What are the top five dos and don’ts for tenants when it comes to choosing insurance in commercial premises?

A 1. Do know your lease and your property exposures & responsibilities

2. Do identify the other risks to which your business is exposed

3. Do find a good advisor – many brokers earn their income from the insurer

4. Price matters of course – either you or broker should ‘cover’ the market

5. Do look for premium instalment options – some insurers offer these for free

1. Don’t forget ‘D&O’ liability insurance – much more relevant these days

2. Don’t skip over any quote documentation; it’s all relevant for cover to apply

3. Don’t forget to disclose past losses and claims to your various insurers

4. Don’t rely on ‘package policies’ if the cover and limits aren’t right for you.

5. Don’t buy just on price – it’s pointless – correct cover is the No.1 priority

Q Can you highlight any pitfalls to avoid?

A Many tenants and some landlords still provide insurers with ‘market value’ for buildings or contents sums insured, but always insure assets for ‘rebuilding’ / ‘reinstatement as new’. Include an allowance for debris removal costs and professional fees in the sums insured and other costs may also need to be included.

Tenant’s ‘work away’ from the premises may not be covered unless specified in the policies.

Avoid insurance companies based overseas. Check their financial rating & credentials.

Q What should commercial tenants check for in the small print?

A Standard conditions relating to building security eg alarms and locks, etc – found in the policy document – these are often overlooked.

Additional conditions usually found on the policy schedule are always worth double-checking.

Q Why does it pay to shop around/review your insurance annually?

A Always review the details you have supplied to all insurers. At renewal time these will be sent to you for checking. If you don’t review frequently then sums insured may become out of date or your business activities may have changed without the insurer’s knowledge.

Shop around if there is a price hike without a good reason

Q What insurance cover should tenants check their landlord has taken out on the building they are renting?

A Very few tenants do check that the landlord has insured the premises according to the lease provisions. If the landlord has not adequately insured buildings for example then there may be insufficient funds to rebuild after a serious fire: that may well impact adversely on the tenant’s ability to continue in business.

Q In your experience are tenants in commercial units generally sufficiently insured?

A Not always no – it can be a mixture of genuine misunderstanding of what needs to be included within sums insured and time needed to concentrate on the detail. Tenants may not just under-insure – there are whole (important) policies that can remain un-insured for years – until the occurrence of a claim or a ‘near-miss

Thanks to Mark A Williams ACII Chartered Insurance Broker, Abaco Insurance Brokers.

Abaco Insurance Brokers Ltd 2 Lewis Court, Grove Park, Enderby, Leicester, LE19 1SD Tel: 0116 281 5960 Fax: 0116 289 1303 Registered in England and Wales No: 07859268 Authorised and regulation by the Financial Conduct Authority