What’s the Difference Between Commercial Property Insurance and Residential Landlords Insurance?
What is Commercial Property Insurance?
Commercial property insurance, also known as commercial landlord insurance, is vital for anyone who owns, lets out or manages buildings which are used commercially by third parties. The tenant is the business, organization or group whose name is on the rental agreement showing they’re allowed to inhabit your property. It is this agreement that proves you’re the landlord or agent and that the property is therefore your responsibility. While they may take out their own insurance in relation to the business, and contents on the premises, as a commercial landlord or property manager, you will also need insurance cover in place. If the property is mortgaged, it’s likely to be a condition of your mortgage provider that you have relevant insurance.
Why do I need Commercial Property Insurance?
Domestic dwellings and commercial buildings are two very different entities when it comes to insuring them. Therefore, it’s not possible to insure a business premises with domestic landlord insurance and expect it to provide the cover you need.
By insuring your commercial property through Secure Risk Solutions we can through a special arrangement get our clients a FREE Re-instatement Valuation, yes that’s right FREE subject to minimum sums insured and conditions that apply. See Full Article.
How is it different from domestic landlord insurance?
There are two main areas where residential property insurance and commercial property insurance differ. These are:
Commercial properties vary much more than domestic properties in terms of their construction and design. They may contain asbestos roofing, wooden barns, metal structures and flat or corrugated roofing which you wouldn’t expect anywhere else. They could also have different types of fixtures and fittings, heating and hot water systems or more complex electrical systems. If these are severely damaged and therefore need rebuilding or replacing, there may be a much more lengthy and costly process to go through to put it right. This is where one of our specially selected commercial building insurance products comes in.
Domestic tenants usually only use their home address for private living and don’t run any kind of business that requires the use of heavy industrial equipment, large numbers of employees or deals with hazardous waste for example. A commercial insurance product would consider all these factors as well as look at the overall use of the building to consider the risks of things like fire, flooding or other damage. Secure Risk Solutions are committed to working with each of our clients to assess the uses of the building and find a cover that will match the risk your tenants pose to it. We will then provide you with a commercial property insurance quote which fully considers the type of building you have and what specifically it will be used for.
The Covers descriptions below should open up when clicked up on otherwise remain in the Black Bold headline.
What do you need to know about underinsurance!
By insuring your commercial property through Secure Risk Solutions we can through a special arrangement get our clients a FREE Re-instatement Valuation
It may surprise you to know that Underinsurance is widespread with up to a staggering 80% of the UK’s commercial properties though to be underinsured and 40% of businesses underinsure their business interruption according to research by one of UK’s leading insurers in conjunction with a well respected Insurance publication. See full Article.
Property Owners Liability
Property Owners Liability might not seem necessary at first; with many landlords expecting their tenants to have their own public liability cover in place should an accident involving the public occur. However as a landlord and commercial property owner you are in fact liable should injury or property damage be caused due to negligence. This means if your property is not adequately maintained and a claim arises due to your negligence in maintaining the property, you will in fact be liable.
Covering your building ensures that you are protected for the costs of repairing damage to the property or even a full rebuild as a result of an insured incident. Seen as one of the most critical parts of commercial property insurance, it’s essential that the sums insured are correct in order to avoid under-insurance. If you are under-insured, the sum declared will be lower than the actual cost of a rebuild. Meaning should a rebuild be required or even a less serious claim a reduction in pay-out may be due.
Commercial landlords are not responsible for any accidental damage caused to a tenant’s property and belongings. Anything that the tenant owns will need to be covered under their own business insurance policy. However, your commercial property may include items such as commercial fridges which you as the property owner would seek to insure under your own policy.
Loss of Rent
Loss of rent cover can be included in any commercial property policy with it providing cover should your property become uninhabitable from an insured event such as a flood or fire. Loss of rent insurance will then reimburse your business for rent you would therefore be unable to collect from tenants. The period of cover will depend on the indemnity period set. Cover is available for 12, 24 or 36 months. Your indemnity period should be carefully considered, often with a worst case scenario in mind. It may for example take years to rebuild your property and find new tenants following a loss.
With additional legal cover you can get help with covering the costs of legal action. This could come in use on multiple occasions, for example; taking court action for non-payment of rent, evicting a tenant or defence of prosecutions.
Unoccupied Property Cover
Your property will likely face periods of being unoccupied. During these periods without tenants, your property will be more susceptible to a variety of risks such as squatting and break-ins. We can therefore tailor your cover to include cover for the periods without tenants.
Typically insurers will allow a period of 30 days for the property to be unoccupied before requiring a specialist Unoccupied Property Owners policy. There can be multiple reasons for why a property is unoccupied but, in most cases, it’s usually because a tenant moves out or when you purchase a property. Remember to ALWAYS check the Terms & Conditions of your policy as some insurers need to be informed as soon as the building becomes vacant.
It is a requirement of this insurance that the policy holder carries out references before the tenants move into the property. In the event of a claim, the responsibility lies with the insured to present the referencing documents.
All types of tenants have to be fully referenced by a Referencing company approved by Insureres– these include DSS, students, self employed lets and the like.
However, for full time employed working tenants a 4 point check will suffice* (please note that the details have to be valid from the start of the tenancy agreement.)
The 4 point check is:
- Identification from the tenant, containing a clear verified photograph
- Either a utility bill or a bank statement
- Credit check; clear of CCJ’s, bankruptcies & indicating confirmation of residency
- Confirmation of employment – a written employers’ reference on company letter headed paper confirming the tenant’s permanent and current employment and that their salary is at least a multiple of 2.5 of the tenant’s rent (the documents should be no more than one month old from the start of the tenancy)
*Please note that if the 4-point check is applied & is in place, there will be no need to do a full profile – though in the event of a claim, the responsibility lies with the insured to produce the appropriate documents.
Please note that when a working person does not meet the above requirements or after working out their ratio of income against the rental requirement it proves insufficient: then a full profile reference has to be carried out. This reference can only be carried out either by a referencing company approved by Insurers.
Tenant Referencing is an essential process when you’re letting out your Investment property. Knowing exactly who is moving into your property will help you to make an informed decision about the tenants you choose and a requirement for Rent Guarantee.
This policy is available for all residential tenants (including students) living in flats, bed-sits, shared accommodation for properties of all sizes throughout the UK. Covers loss or damage as a result of all standard perils including:
- Fire, smoke, explosion, lightning, earthquake
- Storm or flood
- Theft or attempted theft consequent upon violent and forcible entry
- Escape of water
- Malicious damage consequent upon violent and forcible entry
- Riots or civil commotion
- Collision, falling trees or branches
- Lamp-posts, TV aerials or masts.