Commercial Property
Insurance

There’s no doubt that most business owners have a lot on their plate, but adequate insurance is a non-negotiable. If you own the premises you’re operating out of, commercial property cover is, too.

According to QBE data from June 2023, 56% of small business insurance claims were related to property damage. You wouldn’t leave your home uninsured, so why would your commercial building be any different?

What does commercial property insurance cover?

Commercial property insurance, also known as commercial building insurance, is designed to offer protection against a range of events that cause damage to the structure of your business’ building. This includes damage sustained to the walls, floors, roof and (in some cases) permanent fixtures and fittings within and attached to the property.

The latter may be covered by business contents insurance in some cases, which can either be purchased separately or will have coverage bundled under one business building and contents insurance policy. This can also ensure that things like your business’ assets, equipment, stock and record-keeping are covered in the event of a covered incident

Some of the events typically covered by commercial property insurance include:

• Earthquake
• Escape of liquid, such as a burst or leaking pipe
• Explosion
• Extreme weather damage, including storm, lightning and rain
• Fire
• Impact damage, such as a falling tree or vehicle collision with your building
• Theft, attempted theft, vandalism and malicious damage

Commercial property insurance exclusions

Of course, not everything will be covered by your commercial building insurance policy. Here are some common exclusions:

• Criminal, negligent or reckless acts by you
• Faulty workmanship
• Flood (often available as an added extra)
• Lack of proper maintenance
• Mould
• Rust
• Wear and tear
• Vermin damage

Who needs commercial property insurance?

As mentioned, commercial property insurance is crucial for commercial property owners. This includes the following:

• Business owners who own their premises
• Commercial landlords
• Property investors operating in the commercial space
• Tenants covering their assets, inventory and fixtures and fittings

While it’s very important, having insurance isn’t always mandatory. If you’re currently paying off a commercial property loan, though, insurance is typically a condition of your agreement. In that situation, you’ll need to have a policy with adequate coverage at least until your loan is paid off.

The buildings that can be covered by commercial property insurance

There’s a wide range of property types that can be covered by a commercial building insurance policy. These include:

• Shops, retail outlets, and shopping malls
• Industrial properties and manufacturing plants
• Hospitals and medical centres
• Childcare centres
• Places of worship and community gathering
• Storage units and warehouses
• Offices and co-working spaces
• Contiguous office space (such as multiple floors of a commercial high-rise building)

How much does commercial property insurance cost?

There’s a range of factors that impact the cost of commercial property insurance. One of these is the type of operation you’re running, as different businesses pose different risks. Some examples of the average building insurance quotes for different industries, obtained through BizCover, include:

• Accounting services: $151 per month
• General practice (GP): $136 per month
• Warehousing (except grain): $134 per month
• Clothing retailing: $113 per month
• Allied health professionals: $82 per month
• High school operation: $61 per month

However, your industry is just one of many factors that insurers will consider when calculating your commercial building premium. Here are some of the other key variables you’ll need to keep in mind:

• The location of your property: where your business is based is among the most important factors. Your suburb, town or city and state or territory will all be considered, as you may be exposed to different environmental and theft risks.
• The size of the property and its rebuild cost: how much your property will cost to rebuild will factor heavily into your lender’s thinking. Larger, more expensive properties are usually costlier to insure.
• Your property’s safety features: buildings with alarm systems, smoke alarms, security cameras and other safety technologies will often be rewarded with cheaper premiums compared to properties with few to none.
• Your business’ building insurance claims record: if you’ve made several claims for damage in the past, insurers will see you as a riskier prospect to cover. Your premiums will typically be higher as a result.
• The size of your business: larger businesses with more foot traffic each day and a higher number of people with access to their building/s may be exposed to greater risks of damage than those with a limited team and exposure to the public.

How much commercial property insurance coverage do I need?

The sum insured (the amount you’re covered for if your property needs to be entirely rebuilt) will be different for every commercial property owner. You’ll need to consider both the value of the property to rebuild and whether you want to shoot for an amount higher or lower than that.

Being overinsured means you’re entitled to a greater sum if your property needs rebuilding, but you’ll be paying more to cover it. Underinsuring your property will lead to cheaper premiums but will potentially require you to pay part of the rebuild cost out of pocket in the worst-case scenario.

The most accurate way to determine the replacement cost for your property is to get it professionally valued before taking out your policy. There are also building replacement cost calculators available online, though these are typically for residential property and therefore may not give you a reliable estimate.

Tips for making sure you have enough commercial property insurance coverage

• Make sure your estimates are realistic

  Get professional rebuild quotes to give you the greatest peace of mind that the number you’re nominating is accurate. Don’t just guess or rely on figures that may be out of date.

• Review your insurance needs frequently

  Letting your policy sit dormant for years could mean that you end up being caught short if your needs have changed, such as if you’ve renovated the place since updating your coverage.

• Look for a policy with indexation

  One way to help you stay on top of your coverage is by selecting an insurance policy with indexation, which automatically increases your sum insured each year in line with inflation.

Case study: rebuilding after a fire

Frankie owns a small marketing agency, which operates in a standalone building on the main street of their town. The property is also owned by Casey and is insured for a rebuild cost of $250,000, as it’s on the smaller side and is rather old.

In summer, bushfires sweep through Frankie’s town and gut the marketing agency building. It’ll require a complete rebuild, the cost of which is estimated to be $225,000. Fortunately, bushfires are an insured event and the damage falls within the sum insured on the building’s commercial property insurance, so Frankie is able to go through the claims process to cover the cost of rebuilding it.

Frankie’s small business insurance package also allows them to cover the cost of temporarily relocating to, and renting out, a new premises for a few months under its interruption insurance coverage.