8 Types of Insurance for Business Premises

Item: Ellis David
Rating: 4.7
Author: kian@digitalnrg.co.uk

Trading from your own premises changes what you need to insure. A shop, a workshop, a warehouse and an office fail in different ways, and so do the policies that cover them — but the same eight covers come up again and again.

This guide sets out what a business occupying commercial premises should have in place, what each cover actually does, and where the gaps usually appear.

If you are a landlord letting property to others rather than trading from it, the covers you need are different. See our guide to the risks commercial property insurance covers and our property owners insurance page.

1. Commercial Buildings Insurance

If you own the building you trade from, commercial buildings insurance covers damage to the structure caused by insured events such as fire, storm, flood, escape of water, vandalism or malicious damage.

A commercial buildings policy usually covers, subject to its terms and limits:

Structural damage to the building
Repair or rebuilding costs
Debris removal and site clearance
Accidental damage, where that extension is bought
Malicious damage
Escape of water — though insurers commonly apply conditions where a property is unoccupied

The sum insured should be the cost of rebuilding the premises, not what the building would sell for. If it is set too low, most policies allow the insurer to reduce a claim in proportion — so a building insured for three-quarters of its rebuild cost may see three-quarters of the claim paid.

If you lease your premises, the freeholder normally insures the structure and recharges you. Check your lease: repairing obligations and insurance rent vary, and the gap between what the landlord insures and what you are contractually liable for is a common exposure.

2. Contents, Stock and Business Equipment

Contents insurance covers what you have put into the building — furniture, fixtures and fittings you have installed, machinery, IT equipment, tools and stock.

Two points are worth getting right:

Stock fluctuates. If your stock peaks before Christmas or at the end of a season, the sum insured needs to reflect the peak, not the average.
Tenant's improvements are yours to insure. Shopfronts, partitioning, air conditioning and fit-out work you paid for are usually your responsibility, not the freeholder's, even though they are part of the building.

3. Employers' Liability Insurance

If you employ anyone — including part-time cleaners, casual staff or apprentices — employers' liability insurance is almost certainly a legal requirement under the Employers' Liability (Compulsory Insurance) Act 1969. The exemptions are narrow and specific; check rather than assume you fall inside one.

The cover responds if an employee suffers illness or injury because of their work, and helps to:

Pay damages you become legally liable for, whether agreed in settlement or awarded by a court
Cover the legal costs of defending a claim
Meet the statutory minimum limit of indemnity

Failure to hold employers' liability cover where it is required carries penalties for each day you trade without it.

4. Public Liability Insurance

Public liability responds to injury or damage suffered by a third party as a result of your business activities or the state of your premises.

The cover typically pays:

Damages for injury to a member of the public, a customer or a visiting contractor
Damage to third-party property
The legal costs of defending a claim

A customer slipping in your shop, a delivery driver injured in your yard, or your equipment damaging a neighbouring unit are all public liability territory. Claims can be expensive to defend even where the business is ultimately found not to be at fault.

5. Business Interruption Insurance

Business interruption covers the financial consequences of an insured event — the money you do not earn while you cannot trade normally.

It can help meet:

Lost gross profit
Ongoing fixed costs such as rent, rates and wages
Increased costs of working, including temporary premises
The cost of getting back to where you were

One point is routinely missed: business interruption normally responds only where the underlying property damage claim is accepted. The two sections work together, so a gap in the material damage cover usually becomes a gap in the business interruption cover as well.

The other common error is the indemnity period. Twelve months is the default on many policies and it is frequently too short — a fire in a listed or non-standard building can take considerably longer than a year to reinstate, and the clock includes planning, design and tendering, not just building work.

6. Commercial Combined Insurance

Commercial combined insurance brings several covers together under one policy and one renewal date, typically:

Commercial buildings
Contents, stock and equipment
Public liability
Employers' liability
Business interruption
Legal expenses

For most businesses trading from their own premises this is the practical route: one insurer, one wording, one renewal, and no arguments between insurers about which policy responds. The trade-off is that you are committed to a single insurer's appetite and terms across all of it, which is worth testing at renewal.

7. Legal Expenses Insurance

Legal expenses cover meets the cost of pursuing or defending disputes that are not covered elsewhere — employment tribunals, contract disputes, debt recovery, property disputes and tax investigations, depending on the wording.

It usually comes with a legal helpline, which is often the part businesses use most. Cover is normally subject to the insurer agreeing that the case has reasonable prospects of success, so it is not a blank cheque for any dispute.

8. Professional Indemnity Insurance

If your business gives advice, provides a professional service, or produces designs or specifications that others rely on, professional indemnity covers claims that your work caused someone a financial loss.

It matters for consultants, surveyors, designers, IT firms, accountants and anyone whose contracts require it — and many client contracts and framework agreements do require it, at a specified limit.

Professional indemnity is almost always written on a claims-made basis: the policy that responds is the one in force when the claim is made, not when the work was done. That is why run-off cover matters when a business stops trading.

Other Covers Worth Considering

Depending on what you do and where you do it, you may also need cover for goods in transit, business vehicles or a fleet, engineering inspection for lifts and pressure plant, cyber and data, directors' and officers' liability, or product liability. Unoccupied premises need to be declared and are usually written on restricted terms.

Choosing the Right Cover

Selecting cover involves more than comparing price. Before you buy or renew, work through:

What you own versus what your landlord insures
The rebuild cost of the building, if you own it
Peak stock and total equipment values
The activities actually carried out on site, including anything you do at customers' premises
Who you employ, including casual and contract staff
How long you would realistically need to get trading again
Your claims history and risk management arrangements

Getting the rebuild cost and the indemnity period right matters more than shaving the premium. Underinsurance leaves you funding part of your own claim; an indemnity period that is too short leaves you uninsured for the tail of a loss.

Speak to Ellis David About Your Business Premises

Ellis David has arranged commercial insurance from Essex Road in Islington for around 50 years. We hold agencies with more than 100 UK insurers and MGAs, giving access to over 1,000 products and schemes, and our team brings more than 150 years of combined broking experience. You deal with a named adviser, not a call centre.

Speak to us for impartial advice and a no-obligation quotation. We will explain plainly what each policy does and does not do, and where your current arrangements leave a gap.

You may also want to read about commercial insurance, office insurance, shop insurance and unoccupied commercial property insurance.

This article is general information, not a personal recommendation. All cover is subject to the terms, conditions, limits and exclusions of the policy. Ellis David Ltd is authorised and regulated by the Financial Conduct Authority, register number 442066.

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8 Types of Insurance for Business Premises

1. Commercial Buildings Insurance

2. Contents, Stock and Business Equipment

3. Employers' Liability Insurance

4. Public Liability Insurance

5. Business Interruption Insurance

6. Commercial Combined Insurance

7. Legal Expenses Insurance

8. Professional Indemnity Insurance

Other Covers Worth Considering

Choosing the Right Cover

Speak to Ellis David About Your Business Premises

Ellis David Limited is authorised and regulated by the Financial Conduct Authority.

Contact

152-154 Essex Road, London, N1 8LY

020 7354 3881

enquiries@ellisdavid.com

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