Do you need commercial empty property insurance?

Posted: 27th May 2016

Asking yourself whether you need any kind of insurance generally involves weighing up the risks against the protection offered by the particular kind of insurance that may be available.

Just such an exercise might help you to decide whether you need commercial empty property insurance.

The risks

According to some statistics, there are more than 3,000 arson attacks on small businesses in the UK each year and empty shops and other commercial premises are especially vulnerable to this threat.

Although one of the more serious threats, however, arson is not the only risk to empty or unoccupied commercial property. When it is standing empty, the property almost inevitably acts as a magnet to attract all manner of unwelcome attention from thieves, vandals, squatters and fly-tippers. The potential for damage caused by such intruders is considerable.

In addition to these external threats, an empty property is also far more vulnerable to damage caused by internal problems and incidents. When there is no one on the scene to spot a leaking tap, burst pipe, or electrical fault, for instance, and otherwise relatively routine maintenance problem might develop into a major event – with accordingly severe damage.

Your insurer’s response

As if this increase in risks were not enough to worry about, the response from the insurer you generally rely upon is likely to make matters worse.

Whilst standard insurance cover might be providing just the cover you need when the property is in use, many insurers restrict or remove altogether cover for the premises once they have been left empty and unoccupied for longer than, say, 30 to 45 days – the precise period varying from one insurer to another.

This response is prompted by the general increase in the risks faced by an empty commercial property and even those insurers still prepared to offer a degree of protection limit it to what is popularly known as FLEA cover – where the initials stand for the risks of Fire, Lightning, Explosion and Aircraft.

Commercial empty property insurance

If you have invested a significant amount of money in the purchase of your commercial property but need to leave it temporarily unoccupied, the bare protection offered by FLEA cover is likely to be insufficient – a major disaster might still leave you without the financial wherewithal to make good considerable losses.

That is when you might need to restore the required level of protection offered by commercial empty property insurance.

The principle of this type of insurance is simple and straight forward – aiming simply to restore the level of cover you require for the premises when they are left unoccupied.

Nevertheless, it is important to get the appropriate type and level of unoccupied property insurance for your own premises and the stakes involved in getting it wrong may be costly. Therefore, you might want to draw on the expertise and experience of a specialist provider of unoccupied property insurance when arranging the cover you need.

Your responsibility

There may be any number of reasons why your commercial property is empty – you might be waiting for new tenants to move in, for example, or it might be undergoing substantial renovation and refitting. Although you may have taken the precaution of arranging unoccupied property insurance, you still have a responsibility for mitigating the risk of any loss or damage.

Some of the precautions which your insurer may require, or which might help to reduce the cost of your empty property insurance, include:

  • not only the fitting of suitably secure locks on all windows and doors, but also the installation of intruder alarms and smoke detectors;
  • utilities – gas, electric and water – probably need to be turned off completely, and, depending on the nature of the commercial property concerned, locked in that off position;
  • an exception might be made for any sprinkler system installed in the property, when the water for that needs to kept on – and an ambient temperature maintained in order to prevent escape of water from frozen and burst pipes;
  • insurers are also likely to insist on the regular inspection of the empty premises – at intervals depending on the nature of the property concerned, but with a written log kept of each inspection visit.

If the premises you own are likely to be left empty and unoccupied for longer than a month or so, therefore, you might want to give serious consideration to your need for commercial empty property insurance.

To find out more about the way unoccupied property insurance works, you might want to, or, alternatively, watch our video.