Commercial property insurance

What is commercial property insurance?

Commercial property insurance is a form of business insurance. It is sometimes called commercial building insurance and it protects the building that a business operates from. It covers the main structure of the building – the roof, walls, ceilings etc.

In some cases, commercial property insurance will also protect the things inside of a business, such as fixtures and fittings, machinery and equipment or stock. This is typically covered under a form of commercial contents insurance.

What does a commercial property insurance policy cover?

Typically, insured events include:

Every policy differs so it's important to understand exactly what you're covered for by reading the product disclosure statement (PDS).

What does a commercial property insurance policy not cover?

Every policy will have a list of exclusions, here's some of the typical ones:

• Your own criminal or reckless acts
• Gradual deterioration
• Poor maintenance or neglect
• Damage from termites and vermin
• Unexplained shortages
• Design errors and faulty workmanship
• Government-approved demolition
• Rust or mould

Who needs commercial property insurance?

Commercial property insurance is designed for both owner-occupiers and commercial landlords:

• Owner-occupiers: Business owners who own and operate out of their building need cover for the physical building structure as well as their business contents and stock.
• Commercial landlords: Property owners who lease commercial premises to other businesses need commercial building insurance to protect the structure against damage, and can add loss of rent cover.
• Commercial tenants: If you rent a commercial property, the building structure is covered by your landlord. However, under most Australian commercial lease agreements, tenants are required to hold their own public liability insurance (typically $10 million to $20 million), glass cover, and business contents insurance.

How do I calculate how much commercial property insurance I need?

There are many factors that should be considered when calculating how much cover you need.

• The cost to replace/repair the building. If something happens to your building, how much would it cost to repair or replace it? This cost can be really hard to estimate so this is where talking to a broker who specialises in this field can help.
• The cost to replace the equipment. If you own the building and the contents, it's wise to add up the costs for all the equipment and factor this in. You can do this by looking at the market value of your existing equipment to get a sense of how much it's worth factoring in.
• The cost to replace stock. Have a think about how much stock you keep inside your building and what that's worth. Be sure to factor this in.

It can be tricky to correctly estimate what cover you need so it can be helpful to speak with a broker.

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FAQs

• Does commercial property insurance cover loss of rent?

  Yes, many commercial property policies offer loss of rent cover as an optional extra or standard feature to protect landlords if a building becomes uninhabitable due to an insured event. This benefit compensates the owner for the rental income lost while the property is being repaired or rebuilt, often for a set indemnity period such as 12, 24 or 36 months.

• Is flood cover automatically included in commercial property policies?

  No, flood cover is generally not a standard inclusion for commercial property insurance in Australia and must usually be selected as an optional add-on. Because the risk of flooding varies significantly by location, insurers assess this separately and the cost will be reflected in a higher premium if you choose to include the cover.

• Can I get insurance for a vacant commercial building?

  Yes, you can insure a vacant commercial property, but you must notify your insurer if the premises will be unoccupied for more than a specific period, typically 30 to 90 days. Most standard policies have unoccupancy clauses that may reduce coverage or increase premiums because vacant buildings are at a higher risk of vandalism, undetected water damage and squatting.

• Does commercial property insurance cover machinery and equipment breakdown?

  No, machinery breakdown is usually not covered under the standard property damage section and must be added as a separate policy component. This optional cover protects your business against the cost of repairing or replacing essential items like air conditioning units, boilers or production machinery if they suffer a mechanical or electrical failure.

• Is the tenant or the landlord responsible for building insurance?

  The landlord typically arranges the building insurance policy as they own the asset, though the cost is often passed on to the tenant as part of the lease outgoings. It is essential to check the specific terms of your commercial lease agreement and local retail leasing laws to confirm who is responsible for paying the premiums and any associated excesses.

• Does commercial property insurance include public liability for the owner?

  Yes, most commercial property insurance packages designed for landlords include public liability cover to protect the owner against legal claims for third-party injury or property damage occurring at the premises. This is vital for covering accidents in common areas like foyers, car parks or stairwells for which the building owner is legally responsible.

Written by

Gary Ross Hunter

Journalist

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Gary Ross Hunter has over 6 years of expertise writing about insurance, including life, health, home, and car insurance. Having reviewed hundreds of product disclosure statements and published over 800 articles, he loves simplifying complex insurance topics for everyday readers. Gary has contributed to major outlets like Yahoo Finance, The Sydney Morning Herald, and news.com.au, and holds a Bachelor of Arts (Honours) in English Literature from the University of Glasgow, along with a Tier 2 General Advice certification, ensuring his work adheres to ASIC’s RG146 standards. See full bio

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Peta Taylor

Publisher of Insurance

Peta Taylor is a publisher at Finder, working across all of insurance. She's been analysing product disclosure statements and publishing articles for over 2 years. Peta is passionate about demystifying complex insurance products to help users make well educated decisions with confidence. Peta is part of Finder's insurance awards team and works alongside editorial and insights experts to bring users the best insurance products every year. See full bio