Comparing Commercial Property Insurance Policies: What to Look For

The information provided in this article is for editorial purposes only and not intended as financial advice. SwitchPal is an Introducer Appointed Representative (IAR) of Seopa Ltd. (FRN: 313860).

When running a business, extracting every last penny from your expenditure is essential to its health. And not having commercial insurance brings a whole raft of problems. 

But whether you’re looking to get your business adequately insured for the first time or looking to change policy, understanding commercial property insurance is essential to getting the most out of it. 

What is Commercial Property Insurance?

Commercial property insurance is a subset of policies recommended for property owners who run a business from their property or for landlords who rent out their property for commercial use. 

It’s important to differentiate it from a standard buildings and contents insurance policy. Commercial insurance contracts are designed to meet the needs of landlords who rent out their property for commercial uses, including warehouses, industrial units, retail stores, salons, bars and restaurants, offices, and much more. The commercial property insurance market has grown exponentially over the last two decades, with new policies emerging constantly for specific commercial and industrial sectors.

What is the Difference Between Business Buildings Insurance and Commercial Property Insurance?

Business buildings insurance is broadly the same thing as commercial property insurance. However, it means insurance to cover your own business premises rather than a property you let to another business. It covers your bricks and mortar as well as fixtures and fittings against risks which could cost your company a lot of money. 

Key Factors to Consider When Comparing Commercial Property Insurance Policies

Coverage Options

In the modern marketplace, you can be covered for as much or as little as you like. At the most basic level, company property insurance should cover you against fire, burst pipes, flood damage, storm damage, riot damage or theft. Still, it’s also possible now to find specialist coverage for specific industries and businesses, while there has also been an explosion in the range of options available to landlords. Be sure always to check exactly what’s on your policy document 

Premium Costs and Deductibles

Your insurance policy's premium will depend on your business's specifics. In some cases, your very occupation or location could push them up. A jeweller’s workshop, for example, will be more expensive to insure than a scrap metal yard. Flood insurance is considerably more costly in areas which flood almost every year. And you should also bear in mind what the deductibles are considered. Many insurance policies will only pay up to a certain amount. Find out what this is. 

Policy Exclusions and Limitations

Most, if not all, insurance policies have exclusions. These could include premises left unoccupied for extended periods, theft where access isn’t gained by force, wear and tear, the contents of your premises (unless you've also taken out additional contents insurance), or excessive costs.

Limitations will also apply. Most policies have a maximum amount called a policy limit, which is the most that they will pay out for any claim under that policy. Be aware that this is standard practice within the industry, but these limits should be made clear to you when you take out the policy in the first place. 

Claims Process and Customer Service

In the unfortunate event that you must make a claim, a great claims experience is essential. Some companies find that skimping on customer services can drive down their premiums a little, but this is bad news for those who have to make claims. Inferior customer service or claim handling could cost you money, holding on the line when you could be working!

There are plenty of review sites where you can find out the opinions of actual users, but be aware that unhappy customers are considerably more likely to post about their experiences than happy ones, so don’t just tot up the number of complaints and presume the one with the most to be the worst. Bigger companies will have more complaints because they have more customers. Use reputable websites to compare and contrast. 

Policy Add-ons and Endorsements

An insurance endorsement, sometimes referred to as a rider, is a document that amends or adds to the existing terms of your insurance policy. It can adjust your cover, adding new terms or altering existing ones without issuing a new policy. Endorsements ensure your insurance accurately reflects your current circumstances and any additional risks. 

Endorsements can tailor your policy to include or exclude specific types of cover based on your needs. They can also adjust your excess, increasing or decreasing how much you pay out of pocket in case of a claim. They can also change policy details, including updating personal information or the conditions under which you're covered. 

There may also be add-ons which you can add to your basic policy to give yourself extra peace of mind. For businesses where security is a significant factor, such extra benefits may be worth paying extra for. It’s also worth noting that, when applying to tender for some jobs, the body issuing it may require you to have some forms of insurance beyond your minimum legal requirement. This is often the case when dealing with large public bodies, such as councils or the NHS. 

How to Choose the Best Policy for Your Business

With such a bewildering array of policies available, where do you start with all this? Well, the best place is to understand your business needs. What are your legal requirements, and what extra requirements relate to your specific business sector? When assessing these needs, ask yourself what else you’d like to cover and how much you’d be prepared to pay for it. You never know; it may be available as an add-on!

When comparing quotes from different companies, try to take a holistic view. Yes, some policies will be cheaper than others, but there will almost certainly be reasons for this, and it’s important that you know what they are to decide whether you can go with them or not. Beware of the risks of a false economy, and always seek professional advice before signing any contracts if you’re not sure. 

Common Mistakes to Avoid When Buying Commercial Property Insurance

Mistakes happen. Plenty of people have made errors when buying insurance before and have ended up receiving bad news over matters that they could have done themselves. 

One common mistake is the underinsurance of property, in which a business owner who doesn’t think anything will go wrong only finds that they’re not covered if the worst happens. Work out the maximum you could lose and compare that with the policy limit. Ignoring policy exclusions is similarly unwise. They’re called exclusions for a good reason, and it’s highly unlikely that any exception will be made for you. It’s also important to keep up-to-date with your needs and how they may diverge from your policy. Don’t let this drift leave you uncovered, and bring them up to date if necessary.

Business insurance has always been a complex area, and it’s only become all the more so with the growth of the market in recent years. It’s extremely important to understand the needs of your business and how your policy is implemented to ensure that you have the peace of mind that insurance is supposed to deliver in the first place. Informed decision-making is the key; get the information and understand what you’re buying, and you could find yourself significantly benefiting from your company insurance.