COMMERCIAL PROPERTY INSURANCE
What do I need to know?
When a landlord purchases a commercial property, one of the first things that should come to mind is to secure the building with insurance. This sounds quite simple but knowing what to insure, and to what value, is essential to ensure you and your investment are sufficiently protected.
These are some of the items First National Neilson Partners recommend you include in your commercial insurance policy
This figure is typically trending towards $20,000,000 as a standard, and that is what we recommend to First National Real Estate Neilson Partners Commercial clients. Public liability is designed to protect you from claims arising from accidents or injuries that occur as a result of accidental damage from the property.
A tenant would also hold this policy concurrently and provides protection for a different range of reasons.
Loss of Rent
This component provides the landlord with an income to cover both lost rent and outgoings should insurance deem the property uninhabitable, and tenants are unable to operate within the building because of damage. Most landlords do have this insured, however it is imperative to ensure the value of this component is sufficient.
This section goes hand in hand with something called the “indemnity period” which outlines how long this payment would continue for. As an example, if your tenant pays $50,000 per year and $10,000 in outgoings, and your indemnity period on your insurance policy is 24 months, you will need to at minimum insure loss of rent for $120,000 to cover both rental and outgoings for that entire indemnity period.
Some leases ask for the tenants to hold their own glass insurance, but in most cases, we recommend that you hold active glass insurance to replacement value. This covers glass breakage/cracks and is typically activated when people try and break into your or your tenants premises.
This is a commonly excluded portion of policies but provides the ability to claim replacement/repair of your fixtures should they break down/be damaged during a tenants occupation or in a period of vacancy.
This component covers a wide variety of things but is commonly used to ensure that air-conditioners, hot water services etc. can be replaced should they break down at the insured location. It is imperative to ensure that you provide a sufficient figure to ensure you can get replacement/repairs of those items.
This is the most obvious component and one that is included in 99% of the policies we see.
Having the property insured for an adequate amount is crucial. We suggest that to adequately insure your premises, you get an opinion of market value on the property, and insure the property based off that figure. In the case of a rebuild, the value of the property will exceed the building costs allowing a rebuild a close to possible as there will be no financial restrictions as the figure is more than adequate.
There are other components to consider when arranging your insurance policy, but if you consider the above points and anything else beyond that you deem necessary you will have peace of mind.
Under most commercial leases you will be able to charge your policy to your tenant, with some exclusions, this is mainly the Loss of Rent component.
First National Real Estate Neilson Partners Commercial work closely with brokers who are able to arrange quality and affordable policies and welcome the opportunity to discuss these matters with you.