Commercial Property Insurance in Australia: What Coverage You Really Need for Buildings Under $10M

Commercial properties face unique risks which are very different to the risks for owners of residential investment properties and businesses. The question I always ask my clients is, if you own a commercial property (from a small shed, all the way up to a massive multi-tenanted shopping centre), could you afford to rebuild after something goes drastically wrong without relying on insurance? If the answer is no – then understanding the coverage you have, getting the right advice on what you need, and identifying any pitfalls, are all crucial to financially (and emotionally!) surviving a large loss. Commercial property insurance treats you like a business owner, and because of this, the policies respond differently. Read below to delve deeper.

What is Commercial Property Insurance & Why It Matters

Commercial property insurance is a type of insurance that covers physical damage to commercial buildings, liability risks, and potential rental income loss for commercial property owners. Compared to standard Home or Landlords Insurance, where all "normal" aspects of cover are typically built-in, commercial property insurance packages require you to "add on" the cover you need. I break down the covers available to you in more detail below, and when done right, a quality commercial property insurance will not only ensure your building is rebuilt or repaired in full, but will also ensure you can receive financial assistance throughout this process.

Essential Coverages for Properties with Building Rebuild Values under $10M

Building (Property)

Damage cover for property damage to the permanently fixed structure(s) at the premises (roof, walls etc). It will also typically include carports / garages, awnings, storage sheds, fences, pools and sealed surfaces (e.g. bitumen or concrete driveways or car parks). The selected building replacement value needs to cover the full replacement value if you were to rebuild all buildings, new, at today's building costs. I've explained why further down.

Example: fire at the premises, burning the primary building and storage sheds to the ground.

Contents

Not to be confused with the tenant's contents, this is damage cover for equipment, furnishings, or other fit-out which is owned by you, the building owner.

Example: storm damage to roof let rain water in, damaging the property owner's office furniture.

Public Liability

Protects you against claims from third parties (this could be the tenants of the property) for bodily injury or property damage. IT could be from a third party directly, or an astute lawyer bringing the property owner into a lawsuit.

Example: a visitor of the tenant trips over at the premises, and lawyers deem the property owner wholly or partially responsible for the incident.

Machinery / Electronic Equipment Breakdown

Cover for the sudden and unforeseen breakdown, seizing, or internal mechanical / electrical failure (not wear and tear).

Example: A power surge during a storm causes motor damage (i.e. fusion) to a large HVAC system.

Business Interruption (a.k.a Loss of Rental Income)

Cover for the loss of rent because of an insured event, while the premises is being rebuilt or repaired. You can modify how long this coverage lasts by adjusting the "indemnity period". Note: this cover is not a "rent default" type cover.

Example: A fire burns down half the building, and the tenant no longer pays rent due to the contract. While the premises is going through the repair process, which took 6 months, the rental income they would have received was covered during this time which enabled them continue to make debt repayments.

Understanding which coverages you need is crucial, but it's equally important to be aware of common misconceptions that could leave you dangerously exposed. Many property owners fall for myths about flood coverage, under-insurance penalties, and public liability protection. Learn about the most dangerous commercial property insurance myths and why they're wrong before we discuss ways to save on premiums.

Once you have the right coverage in place, the next step is ensuring you're not overpaying for it. With commercial property insurance premiums on the rise, there are several proven strategies to reduce your costs without compromising on essential protection. Discover how to reduce your commercial property insurance premiums through comparing quotes, strategic excess adjustments, and security improvements.

Securing your Investment

Getting it wrong with commercial property insurance can have great implications, and we typically purchase commercial property as a wealth building investment. By understanding your cover, achieving savings while not cutting cover (remember the consequences this can have), and by seeking quality advice from an expert in commercial property insurance, you are taking the necessary steps to ensure you can survive any insurable event and your investment continues to prosper. Not sure if your building is properly insured? Book a no obligation 15 min call with one our commercial property insurance experts today for a complimentary review and advice. Want to see how your premium stacks up? Get up to 8 quotes online within minutes today at assetshield.com.au.