Why should landlords obtain Commercial Building Insurance?

Why should landlords obtain Commercial Building Insurance?

Why should landlords obtain Commercial Building Insurance?

4 Apr 2023

Letting out a residential or commercial property can be a great investment, but as a landlord, you must ensure that you have the right Commercial Building Insurance in place. Discover how to get an accurate sum insured for your property and the potential limitations of an "Average Clause".

Property portfolio owners need to protect their assets at all costs. Commercial Building Insurance is a vital aspect of running a successful portfolio of properties.

As a landlord, your property is one of your most significant investments. You have a lot of responsibilities, and worrying about the safety and security of your property should not be one of them, especially if you hold a portfolio of properties. If not sufficiently covered you could be liable for unforeseen risks such as natural disasters, theft, vandalism, and liability claims.

As global property insurance prices recently rose by 6%, a competitive tailor-made buy-to-let policy on a rental business is essential for protecting your investments.

In this article, we examine why landlords must be protected.

Is it compulsory to cover it?

There's no legal obligation for landlords to have insurance, but most buy-to-let mortgages come with the condition that you have it. Even if it's not a legal requirement in your area, having Building Insurance is still a wise decision.

Being a commercial landlord comes with speciality risks not usually associated with personal property. For example, a tenant injuring themselves or accidental damage caused by the tenant.

Also, if a tenant cannot live in the property due to an insured event, such as fire or flood, a landlord policy can cover the re-accommodation expense and even the loss of rent.

How to get the correct sums insured?

In most instances, the sums insured for a property will be for the structure of the building plus built-in items such as kitchens, bathrooms, and boilers.

You will need to ensure the BSI is covering the property for its full rebuilding cost, including professional fees and the cost of site clearance. Commonly these professional fees and the cost of site clearance are not considered, resulting in underinsurance.

Ways you can obtain an accurate sum insured for a property:

  1. Firstly, you can use the Building Cost Information Services (BCIS) online calculator.

  2. Secondly, your mortgage offer/terms will have the reinstatement/rebuild value which is the minimum you must insure for. This is normally taken from a survey to protect the lender as they have a claim on the property.

  3. Thirdly, obtain a professional Reinstatement Cost Assessment. I would always recommend this option & given inflation and the increase in costs of materials/labour. Now is the ideal time to review any sums insured.

The law of average

The majority of landlord insurance policies will include the law of average, also known as ‘The Average Clause’. If at the time of a loss, a property is underinsured, the insurance company will reduce the value of the claim per the amount of underinsurance. This does not just apply to a total loss claim but claims of all values.

For example, if a property is insured for £100k, but the actual sums insured should be £200k. This equates to it being 50% insured, in the eventuality of a £50k claim, only £25k will be paid out under the average clause.

In some cases, where a property is significantly underinsured, insurers can disregard the average clause and completely reject the claim, where a lack of care is taken from the property owner to correctly represent the sums insured of the property.

Summary

In conclusion, Commercial Building Insurance provides peace of mind, knowing that your investment is protected against any unforeseen circumstances. It's vital that your coverage is tailored to all exposures and fully protects you.

At Servca, we specialise in the placement of property portfolios & non-standard Commercial Building Insurance cases. We work closely with our partner-broker clients to build robust risk management strategies that provide your clients with the peace of mind they need.

Property portfolio owners need to protect their assets at all costs. Commercial Building Insurance is a vital aspect of running a successful portfolio of properties.

As a landlord, your property is one of your most significant investments. You have a lot of responsibilities, and worrying about the safety and security of your property should not be one of them, especially if you hold a portfolio of properties. If not sufficiently covered you could be liable for unforeseen risks such as natural disasters, theft, vandalism, and liability claims.

As global property insurance prices recently rose by 6%, a competitive tailor-made buy-to-let policy on a rental business is essential for protecting your investments.

In this article, we examine why landlords must be protected.

Is it compulsory to cover it?

There's no legal obligation for landlords to have insurance, but most buy-to-let mortgages come with the condition that you have it. Even if it's not a legal requirement in your area, having Building Insurance is still a wise decision.

Being a commercial landlord comes with speciality risks not usually associated with personal property. For example, a tenant injuring themselves or accidental damage caused by the tenant.

Also, if a tenant cannot live in the property due to an insured event, such as fire or flood, a landlord policy can cover the re-accommodation expense and even the loss of rent.

How to get the correct sums insured?

In most instances, the sums insured for a property will be for the structure of the building plus built-in items such as kitchens, bathrooms, and boilers.

You will need to ensure the BSI is covering the property for its full rebuilding cost, including professional fees and the cost of site clearance. Commonly these professional fees and the cost of site clearance are not considered, resulting in underinsurance.

Ways you can obtain an accurate sum insured for a property:

  1. Firstly, you can use the Building Cost Information Services (BCIS) online calculator.

  2. Secondly, your mortgage offer/terms will have the reinstatement/rebuild value which is the minimum you must insure for. This is normally taken from a survey to protect the lender as they have a claim on the property.

  3. Thirdly, obtain a professional Reinstatement Cost Assessment. I would always recommend this option & given inflation and the increase in costs of materials/labour. Now is the ideal time to review any sums insured.

The law of average

The majority of landlord insurance policies will include the law of average, also known as ‘The Average Clause’. If at the time of a loss, a property is underinsured, the insurance company will reduce the value of the claim per the amount of underinsurance. This does not just apply to a total loss claim but claims of all values.

For example, if a property is insured for £100k, but the actual sums insured should be £200k. This equates to it being 50% insured, in the eventuality of a £50k claim, only £25k will be paid out under the average clause.

In some cases, where a property is significantly underinsured, insurers can disregard the average clause and completely reject the claim, where a lack of care is taken from the property owner to correctly represent the sums insured of the property.

Summary

In conclusion, Commercial Building Insurance provides peace of mind, knowing that your investment is protected against any unforeseen circumstances. It's vital that your coverage is tailored to all exposures and fully protects you.

At Servca, we specialise in the placement of property portfolios & non-standard Commercial Building Insurance cases. We work closely with our partner-broker clients to build robust risk management strategies that provide your clients with the peace of mind they need.

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+44 (0) 2895582000

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Broker at Lloyd’s SLM1389

© 2024 Servca


Servca Group Ltd is a private limited company registered in England and Wales; Registered Number: 7727494; Registered Office: Dukes House, 32-38 Dukes Place, 5th Floor, London, EC3A 7LP, United Kingdom. Authorised and regulated by the Financial Conduct Authority. Servca European Insurance Brokers Ltd (a private limited company incorporated in Malta and enrolled to act as an insurance broker); Tower Business Centre, Level 3, Tower Street, Swatar, BKR, 4013, Republic of Malta. UK branch office is registered in England and Wales, authorised and regulated by the Financial Conduct Authority. Servca Canada Insurance Group Inc, a private limited company incorporated at 40 King Street West, Suite 2100, Toronto, M5H 3C2, Canada. Servca group of companies are owned and operated by Servca Group Holdings Ltd, a private limited company registered in England & Wales.

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Global Headquarters

Servca Group

Dukes House

32-38 Dukes Place

5th Floor

London, EC3A 7LP

United Kingdom


+44 (0) 207 2250000

info@servca.com


Broker at Lloyd’s SLM1389

European Office

Servca Europe

Dragonara Business Centre

Dragonara Road

5th Floor

St Julian’s, STJ 3141

Republic of Malta


+356 (20) 341690

eu@servca.com


Broker at Lloyd’s (Brussels) SLM1883

Canadian Office

Servca Canada Insurance Group Inc
40 King Street West
Suite 2100
Toronto
M5H 3C2
Canada


+1 (647) 846 5555

canada@servca.com


Non-regulated servicing company

Northern Ireland

Servca Northern Ireland
River House Belfast

48-60 High Street

Belfast

BT1 2BE



+44 (0) 2895582000

ni@servca.com


Broker at Lloyd’s SLM1389

© 2024 Servca


Servca Group Ltd is a private limited company registered in England and Wales; Registered Number: 7727494; Registered Office: Dukes House, 32-38 Dukes Place, 5th Floor, London, EC3A 7LP, United Kingdom. Authorised and regulated by the Financial Conduct Authority. Servca European Insurance Brokers Ltd (a private limited company incorporated in Malta and enrolled to act as an insurance broker); Tower Business Centre, Level 3, Tower Street, Swatar, BKR, 4013, Republic of Malta. UK branch office is registered in England and Wales, authorised and regulated by the Financial Conduct Authority. Servca Canada Insurance Group Inc, a private limited company incorporated at 40 King Street West, Suite 2100, Toronto, M5H 3C2, Canada. Servca group of companies are owned and operated by Servca Group Holdings Ltd, a private limited company registered in England & Wales.

Privacy Policy

Cookies

Global Headquarters

Servca Group

Dukes House

32-38 Dukes Place

5th Floor

London, EC3A 7LP

United Kingdom


+44 (0) 207 2250000

info@servca.com


Broker at Lloyd’s SLM1389

European Office

Servca Europe

Dragonara Business Centre

Dragonara Road

5th Floor

St Julian’s, STJ 3141

Republic of Malta


+356 (20) 341690

eu@servca.com


Broker at Lloyd’s (Brussels) SLM1883

Canadian Office

Servca Canada Insurance Group Inc
40 King Street West
Suite 2100
Toronto
M5H 3C2
Canada


+1 (647) 846 5555

canada@servca.com


Non-regulated servicing company

Northern Ireland

Servca Northern Ireland
River House Belfast

48-60 High Street

Belfast

BT1 2BE


+44 (0) 2895582000

ni@servca.com


Broker at Lloyd’s SLM1389

© 2024 Servca


Servca Group Ltd is a private limited company registered in England and Wales; Registered Number: 7727494; Registered Office: Dukes House, 32-38 Dukes Place, 5th Floor, London, EC3A 7LP, United Kingdom. Authorised and regulated by the Financial Conduct Authority. Servca European Insurance Brokers Ltd (a private limited company incorporated in Malta and enrolled to act as an insurance broker); Tower Business Centre, Level 3, Tower Street, Swatar, BKR, 4013, Republic of Malta. UK branch office is registered in England and Wales, authorised and regulated by the Financial Conduct Authority. Servca Canada Insurance Group Inc, a private limited company incorporated at 40 King Street West, Suite 2100, Toronto, M5H 3C2, Canada. Servca group of companies are owned and operated by Servca Group Holdings Ltd, a private limited company registered in England & Wales.

Privacy Policy

Cookies