Commercial property seems to offer an especially sound investment at the moment. The simple laws of supply and demand – where supply is falling and demand continuing to rise – sees the value of commercial property steadily rising, says the latest market report published by the Royal Institute of Chartered Surveyors (RICS).
If you have taken the plunge and entered the commercial property market, insurance is likely to become a priority in order to keep your investment safe and secure against a wide range of risks and perils.
Since this is going to be an ongoing cost, it might help to look at just what needs to be covered and how you might save money on the commercial property insurance you arrange.
What needs to be covered?
Your investment has been in the purchase of the commercial property itself – the structure and fabric of the building.
It is this that your insurance needs to protect against a wide range of potentially serious threats, such as fire, flooding, storm damage, escape of water, smoke damage, impacts (by vehicles, aeroplanes or from falling trees and branches), vandalism and theft.
The potential from damage is such that the entire building may be destroyed, so that any insurance cover needs to anticipate the possibility of having to rebuild it from scratch. When making this evaluation it is important to remember that rebuild costs may be quite different to the price for which you bought the property or to its current market value.
Whether you own the commercial property from which to run your own business or let it to tenants, you might have a valuable amount of contents also to protect against a range of threats and perils. These contents need to be carefully evaluated, to ensure that you avoid the twin pitfalls of over- or underinsurance.
Your public liability as the property owner is also something you may need to protect. If any neighbour, visitor to the premises or passing member of the public suffers an injury or has their property damaged and holds you responsible, you may face claims for very hefty compensation. This type of public liability cover typically provides cover for a minimum of £1 million – but might be considerably higher, depending on the type of business operated from the premises.
If you are the landlord of the commercial property, you also have a particular responsibility for the safety of your tenants. Your liability towards such tenants may need to be protected by suitable landlords’ liability insurance.
Saving money on these elements of insurance
There are a number of broad headings under which you might your quest for cheaper commercial property insurance might be made:
- as with the purchase of practically any goods or services, you may want to use all of the resources at your disposal to shop around, compare products and their prices;
- the cheapest price is not everything, of course, since you need to ensure that the policy you choose provides the protection your particular commercial property requires – your objective is more likely to involve finding good value for money at a competitive price;
Tailoring the cover
- as a means to securing that good value for money, you may need to tailor the insurance cover to suit your particular needs;
- some risks may be more important than others in your individual case, whilst others might pose less of a threat – both subsidence and flooding are risks which typically attract relatively high premiums, for example, so if you are able to do without such cover, you may significantly reduce the cost of your premiums;
- matching your particular, individual needs for commercial property insurance with the most suitable product from a huge range of possibilities is no mean achievement;
- to ensure that you get the closest fit possible, you might want to draw on the expertise and experience of specialists in the provision of this kind of insurance;
- the more you demonstrate your own responsibility for minimising the risks to your property, the more favourably is any insurer likely to view your proposal for cover – and charge an accordingly reduced premium;
- this is likely to be reflected in the measures you take to improve the physical security of the premises against theft, break-ins and vandalism and in the early warning systems you are able to install – such as smoke detectors and fire alarms, intruder alarms and regular maintenance inspections;
- to help manage the cash flow of your business, it might be tempting to pay for essential insurance cover as you go – through monthly instalments;
- this may prove an expensive way of purchasing the cover, however, and you are likely to achieve significant savings by paying for your insurance through a single annual transaction.
By carefully considering just what needs to be covered and how you might save money on the purchase of that cover, you may succeed in securing good value for money from your commercial property insurance.