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Insuring Commercial Property During Renovation or Refurbishment

Your existing commercial property insurance may not fully cover a building while it is being renovated or refurbished. Works change the risk, so you need to tell your insurer before they start. Insurance for commercial property renovation often means extra cover for the works themselves, and you should check what liability insurance you and your contractors hold.

A renovation project can quickly leave your commercial property insurance out of step with the building it protects. Scaffolding goes up, tenants leave, materials and valuable tools arrive on site and the building may sit partly empty for months. Each of these changes how an insurer sees the property.

This guide explains how renovation affects your cover, what insurers will ask, the types of insurance you may need and who is responsible for what.

Key Takeaways

  • Tell your insurer about planned renovation work before it starts. Your existing policy may restrict or exclude cover while works are under way.
  • Your buildings insurance normally covers the existing structure, but it may be restricted during works unless your insurer has agreed to them. The new works may need separate renovation insurance cover, depending on your building contract.
  • Check your contractor's own public liability and employers liability insurance before they start, and ask for copies of their certificates.
  • A building emptied for refurbishment is likely to be treated as unoccupied, which usually brings conditions and restrictions.
  • Under CDM 2015, businesses commissioning construction work have legal duties as commercial clients.
  • Update your mortgage provider and any tenants affected by the work, where your agreements require it.

Why Renovation Changes Your Risk Profile

Insurers price commercial buildings insurance on the building as it normally stands and is used. Renovation or refurbishment changes that picture, often for months at a time.

The main risks that increase during works are:

  • Fire. Cutting, grinding, welding and other hot works are a well-known cause of fires on building sites. Stored materials and waste can add to the risk.
  • Theft and break-ins. Building materials, copper pipe, plant and contractors' tools are attractive to thieves, and scaffolding can make it easier to get in.
  • Escape of water. Altered plumbing and heating systems can leak, sometimes going unnoticed in an empty building.
  • Storm damage. An exposed roof or temporary covering is vulnerable to wind and rain.
  • Structural alterations. Removing walls, adding floors or altering foundations brings a risk of unexpected damage to the existing structure.
  • Malicious damage. An empty or partly secured building is more exposed to vandalism.

The size, value and length of the project all affect how much the risk profile changes, and how your property insurance needs to adapt.

Does Your Existing Policy Cover Renovation Work?

It depends on the policy wording and on the work involved. Minor redecoration may make no difference to your cover. Larger works, such as structural alterations, extensions, rewiring or a full strip-out, are more likely to affect it.

Some policies restrict cover while works are in progress, or exclude damage caused by the works themselves. Others allow works up to a certain contract value, as long as the insurer is told. Your existing policy will not normally cover general wear and tear, or the cost of putting right poor workmanship, whether or not works are taking place.

Why the Insurer Needs to Be Told

Under the Insurance Act 2015, business policyholders must make a fair presentation of the risk, and that duty applies when a policy is varied as well as when it is first taken out. Many commercial policies also include a condition requiring you to tell the insurer about changes that increase the risk.

If the insurer isn't informed and a claim arises, it may reduce the payment, apply terms it would have imposed, or in serious cases decline the claim. Telling your insurer, or your broker, before work starts reduces that risk.

What Your Insurer Will Want to Know

When you notify your insurer about a renovation project, expect questions such as:

  • What work is being done, and does it involve structural alterations?
  • What is the contract value, and how long will the works last?
  • Who is the contractor, and what insurance do they hold?
  • Will any hot works be carried out, and how will they be controlled?
  • Will the building be occupied, partly occupied or empty during the works?
  • How will the site be secured outside working hours?
  • What is your claims history for the property?

The answers help the insurer decide whether cover can continue as it is, with extra conditions, or whether a different policy is needed.

The Insurance You May Need During Renovation

Buildings Insurance for the Existing Structure

Your commercial buildings insurance protects the existing building against insured events such as fire, storm damage and escape of water, with flood cover depending on the location and the policy. During works, the insurer may add conditions, such as rules for hot works, security or regular site checks.

Remember to review your sum insured once the work is finished. Improvement work can increase the cost of rebuilding the property, and an out-of-date figure can lead to underinsurance.

Insurance for Commercial Property Renovation Works

New works, materials on site and the parts of the building being altered may need separate cover. This is often called contract works or renovation insurance. It protects the value of the work in progress against damage until the project is complete.

Whether the property owner or the contractor arranges this depends on the building contract. Standard building contracts, including those published by the Joint Contracts Tribunal (JCT), set out who must insure the works and the existing structure. Under the JCT option for work to existing buildings (Insurance Option C), the property owner is usually responsible for insuring both the existing structure and the new works, often in the joint names of the owner and the contractor. Not every property policy can be extended to do this, so check with your broker before you sign the contract.

Liability Insurance

Liability cover becomes more important during works, because more people are on and around the site.

  • Property owners liability cover protects you if a member of the public, visitor or tenant is injured, or their property is damaged, because of the condition of your premises.
  • Public liability insurance for the works themselves is usually held by the contractor, covering injury or damage caused by their activities.
  • Employers liability insurance is a legal requirement for most employers. GOV.UK guidance states that cover must be for at least £5 million. If you directly employ people on the project, such as a site manager or maintenance staff, you will need it.

Loss of Rent and Business Interruption Insurance

If a fire or flood during the works delays the project, an owner-occupier may be unable to trade for longer, and a landlord may lose rent from tenants who are still in occupation. Loss of rent and business interruption insurance can respond to losses caused by an insured event, but they need a realistic indemnity period. If the building is empty and you are relying on rent from a new letting after the works, standard loss of rent cover may not respond, so ask about advance loss of rent cover before the works start.

Legal Expenses

Legal expenses cover can help with the legal fees involved in some disputes, including disputes with contractors over repairs or renovation work, depending on the policy terms.

Who Insures What: You or the Contractor?

A common misunderstanding is that the contractor's insurance covers everything. It usually doesn't.

A contractor would normally hold building contractors insurance that includes public liability insurance, employers liability insurance for their staff, and cover for their own valuable tools and plant. They may also hold contract works cover, depending on the building contract.

You may also be liable if the works damage a neighbouring property, for example through subsidence, vibration or removal of support, even where nobody was negligent. The contractor's public liability usually responds only if they were at fault, so ask your broker whether the project needs non-negligence cover (clause 6.5.1 under JCT contracts).

Before work starts:

  • Ask for copies of the contractor's insurance certificates and check the limits and expiry dates.
  • Read the insurance clauses in the building contract and share them with your broker.
  • Check whether the contract requires cover in joint names, and whether your insurer will agree to that.
  • Make sure the insurance is in place for the whole project, until the works are complete.

Renovating an Empty or Partly Occupied Property

Many refurbishments happen between tenants, or require tenants to leave while work is carried out. A building that is empty during works is likely to be treated as unoccupied, even if contractors are on site during the day.

Many policies restrict or change cover once a property has been unoccupied for a number of days set out in the policy wording, and apply conditions such as regular inspections and securing the building. A claim may be declined if these aren't met. If the building will be empty for some time, unoccupied commercial property insurance can be arranged for the void period.

Mixed-Use Buildings

In mixed commercial and residential buildings, such as a shop with flats above, work on one part can affect the whole building. Residential units may stay occupied while the commercial premises are refurbished, or the reverse. Your insurer needs the full picture, and any residential landlord insurance should be reviewed alongside the cover for the commercial part.

Your Duties as a Commercial Client

Insurance isn't the only consideration. The HSE explains that, under the Construction (Design and Management) Regulations 2015, a commercial client is any individual or organisation that carries out a construction project as part of a business.

Commercial clients have duties that include making suitable arrangements for managing the project, appointing competent designers and contractors, and providing pre-construction information. Larger projects must also be notified to the HSE. Insurers may ask how these duties are being managed, particularly on bigger projects.

Other People to Tell

Your insurer isn't the only party who may need to know about the works.

  • Your mortgage provider. Many mortgage terms require the lender's consent or notice before structural alterations. Check your agreement.
  • Your tenants. Commercial leases often set out how works affect access, rent and the tenant's use of the premises.
  • The freeholder. If you hold a leasehold interest, the freeholder's consent and insurer may be involved.

What Affects Commercial Property Insurance Cost During Works

There is no fixed figure for commercial property insurance cost during a renovation, because each project is assessed individually. The main factors are:

  • The type and value of the work, and whether it involves structural alterations.
  • How long the works will last.
  • Whether the building will be occupied, partly occupied or empty.
  • The use of the building and its location, including flood risk.
  • Security arrangements and fire precautions on site.
  • Your claims history.

A cheaper policy with restrictions you haven't noticed may cost far more after a claim than the premium saved. The right cover depends on the project, not the price alone.

Making a Commercial Property Insurance Claim During Renovation

If damage happens while works are under way:

  1. Make the site safe and prevent further damage where you can do so safely.
  2. Contact your broker or insurer as soon as possible.
  3. Take photographs and keep records of the damage.
  4. Tell the contractor and ask them to notify their own insurer if their work may have caused the damage.
  5. Keep receipts for any emergency repairs.

Working out whose policy should respond can take time when both the owner and the contractor are insured. Having a broker who knows both policies helps.

How Ellis David Can Help

Larger renovation projects often fall outside standard cover. The building, the contract, the occupancy and the scale of the works all affect what you need, and it is easier to get right with someone who takes time to understand the project.

Ellis David has been arranging insurance for over 50 years, from our office on Essex Road in Islington, London. Our UK-based team has 150+ years' combined experience, and we have access to 100+ UK insurers and MGAs and 1,000+ products. That gives us room to look for insurance for commercial property renovation across commercial and residential properties, including projects outside an insurer's standard appetite.

There's no call-centre anonymity. You can meet the team who will look after your policy, and the same people will help if you need to make a claim.

Whether you're refurbishing a building you occupy or updating your commercial let property insurance before works on a tenanted building, we can review your property owners insurance ahead of the project. Get in touch for a commercial property insurance quote before work starts.

Frequently Asked Questions

Does Commercial Property Insurance Cover Renovation Work?

Not always. Many commercial property insurance policies restrict or exclude cover while significant works are under way, or require the insurer to be told before they start. Minor work may make no difference, but structural alterations, extensions or a strip-out are likely to affect your cover. Check your policy wording and tell your insurer before work begins.

Do I Need Renovation Insurance If My Contractor Is Insured?

Possibly. A contractor's insurance usually covers their own liability, staff and tools, and sometimes the works, depending on the building contract. The existing building, your liability as owner and your rental income normally remain your responsibility. Ask for the contractor's certificates and check the insurance clauses in the contract.

Is My Building Covered If It Is Empty During Refurbishment?

A building emptied for refurbishment is likely to be treated as unoccupied. Many policies restrict or change cover once a property has been empty for a set number of days, and apply conditions such as regular inspections. Tell your insurer before the building becomes empty.

Is Employers Liability Insurance a Legal Requirement During a Renovation?

Employers liability insurance is a legal requirement for most employers in the UK, with cover of at least £5 million. If you directly employ anyone working on the project, you will need it. Contractors should hold their own employers liability insurance for their staff.

What Do I Need to Tell My Insurer Before Renovating?

Your insurer will usually want to know what work is planned, whether it includes structural alterations, the contract value, how long it will last, who the contractor is and whether the building will be occupied. They may also ask about hot works, security and your claims history.

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