Commercial Property Insurance: A cheat sheet for protecting your asset (or your clients)

Commercial Property Insurance is often thought of as something that you set and forgot, but when is the last time you actually reviewed your coverage?

We come across too many policies which have been rolled over year after year that are simply inadequate for the assets requirements.

For freehold assets in the sub $10M range, use this cheat sheet:

Building;

Replacement values have gone up 30-40% in the last few years due to inflation and construction prices. Your sum insured from 2020 will leave you significantly underinsured in the event of a loss.

If you are refinancing or drawing out equity for a new purchase, there will be an insurance estimate as part of the val. While not 100% accurate, it is better than being underinsured and likely more inline with current market conditions.

Alternatively, contact a commercial builder or get us to do a calculation for you.

Loss of Rent (Business Interruption);

12 months indemnity period doesn't cut it anymore in todays climate. In the event of a major loss, could you really clear the site, go through the planning process and rebuild your property within 1 year?

Highly unlikely.

The cost difference between 12 and 24 months indemnity period is minor. Make sure you're still getting rental income when you are unable to get rental income, for a period of time that is realistic for repairs/rebuilding.

Property Owners Liability;

$10M, minimum.

Whether your tenant has liability insurance or not is irrelevant. This isn't for the tenant, it's for you/your holding entity in the event you/your holding entity are found negligent.

Glass;

Yes, under most lease agreements the tenant is responsible for this. But for a couple hunded dollars of premium, save yourself the trouble and have the extra layer of protection.

Machinery Breakdown;

Not essential, but highly recommended.

Cooling towers, air-con systems, elevators, electrical switchboards & cabling, fans, pumps, security systems.. All very expensive to repair/replace in the event of a breakdown. Not to mention the implications if your tenants decide to withhold rent due to the above not being in working order.

I recommend a stand alone policy for this through the likes of CGU, Vero or Sura, as opposed to the bolt on under a business package. Much more comprehensive and designed specifically for this purpose.

We insure millions of commercial property every month, so if in doubt, please just reach out.

1300 521 355