Enquire Online
Call Us

Insuring Warehouses and Industrial Units: The Risks Landlords Often Miss

Warehouse insurance for a landlord protects the building you own and the rent it earns, not the business your tenant runs inside it. The risks landlords most often miss are an out-of-date rebuild cost, a change of tenant or use that the insurer never hears about, and the gap between what the lease says and what the policy actually covers.

If you let a warehouse, storage building or industrial unit in the UK, your commercial landlord insurance is only as good as the information behind it. A policy can look complete on paper and still leave you exposed, because industrial premises change more than most. Tenants come and go, stored goods change, and units sit empty between lets.

This guide sets out where those gaps usually appear and the questions worth asking at your next renewal.

Key Takeaways

  • A landlord's warehouse insurance covers the building, the rent and the landlord's liability. The tenant's stock, business contents, transit and business interruption need separate insurance.
  • Review the rebuild cost regularly. Where a policy includes an average condition, underinsurance can reduce any claim in proportion, not just a total loss.
  • Tell your insurer about new tenants, changes in stored goods or new processes on site. Under the Insurance Act 2015, these may be material.
  • Property owners liability does not pay to repair your own building.
  • Set the loss of rent indemnity period to reflect how long a realistic rebuild and re-let would take.
  • Unoccupied units usually carry conditions, such as inspections, that must be met for cover to apply.

What Warehouse Insurance Covers for a Landlord

A landlord's warehouse insurance is usually built around buildings cover, loss of rent and property owners liability, with landlord's fixtures, accidental damage and legal expenses often available as additional covers. Together, these make up the core of landlord insurance for commercial property. The exact wording varies by insurer, so the policy terms always decide what is and isn't included.

The Tenant's Side

Your tenant needs their own, separate insurance for the business activities they carry out. That typically includes stock cover for stored goods, business contents such as office equipment and phone systems, transit cover for goods on the road, business interruption cover for their lost profit, and employers liability insurance for their staff.

None of this sits on your policy. If a fire destroys the building and the tenant's stock, your insurer deals with the building and your lost rent. The tenant's stock is a matter for the tenant's insurer, if they have one.

That split is why it pays to know whether your tenant is adequately protected. A tenant whose business fails after an uninsured loss is a tenant who stops paying rent.

Risk 1: An Out-of-Date Rebuild Cost

The figure your buildings cover is based on should be the full cost of rebuilding the property, not its market value. For warehouses and industrial units, the two can be very different.

A rebuild cost (sometimes called the reinstatement or replacement cost) should allow for:

  • Demolition and debris removal after extensive damage.
  • Professional fees for architects, surveyors and engineers.
  • Current building regulations, which may require a higher standard than the original build.
  • The construction method, including the type of roof and wall cladding.

Building costs change over time, and an extension, mezzanine floor or new loading bay adds to the figure. If the sum insured hasn't been reviewed in several years, it may no longer reflect what a rebuild would cost. A professional valuation, for example from a RICS-qualified surveyor, is a sound way to check it.

How Underinsurance Reduces a Claim

Many commercial property policies include an average condition. Where average applies, a claim on an underinsured building is reduced in proportion to the shortfall. Some policies allow a tolerance before it applies, or waive it altogether, so check your own wording.

For example, if the true rebuild cost is £1,000,000 but the building is insured for £750,000, it is insured for 75% of its value. Under an average condition, a £200,000 claim would be paid at 75% of the loss, so £150,000. You would cover the remaining £50,000 yourself, even though the claim is well within the sum insured.

That applies to partial losses too, not just a total rebuild, which is why it catches people out.

Composite Panels

Many warehouses and industrial units are built with composite panels. Insurers commonly ask what type of panel has been used, because the core material can affect how a fire behaves and how the risk is assessed. The answer can influence whether an insurer will offer terms and on what basis, so it is worth knowing the construction details of your building before you renew.

Risk 2: A Change of Tenant or Use the Insurer Doesn't Know About

An industrial unit let to a furniture retailer for storage presents a very different risk profile from the same unit let to a business storing aerosols, tyres or lithium batteries. Yet landlords sometimes renew the same policy, year after year, without updating the insurer on who is in occupation and what they do.

Under the Insurance Act 2015, business policyholders have a duty to make a fair presentation of the risk. That means disclosing every material circumstance you know or ought to know, meaning anything that would influence a prudent insurer's judgement. A new tenant, a change in the goods stored, or a shift to manufacturing on site may all be material.

If something material isn't disclosed, the insurer's remedies depend on what it would have done had it known. In some cases that can mean a reduced claim payment, different terms applied after the event, or, in serious cases, the policy being treated as if it never existed.

Questions worth asking each time a unit changes hands:

  • What will the new tenant store, and in what quantities, including at busy times?
  • Will they carry out any processes on site, such as cutting, welding, spraying or charging vehicles?
  • Do they hold flammable or hazardous materials?
  • Will the hours of occupation or security arrangements change?

If you own several units across the manufacturing and warehouse sectors, keeping a simple record of each tenant and their activities makes renewal much easier.

Risk 3: Assuming Liability Cover Pays for Damage to the Building

Liability insurance and property insurance do different jobs, and the difference matters after a claim.

Property owners liability covers your legal liability to other people: compensation and legal costs if a third party is injured or their property is damaged because of your premises. It does not pay to repair or rebuild your own building. That is the job of buildings cover, which responds to physical damage caused by an insured peril.

Public liability for the tenant's own business activities is usually the tenant's responsibility, and sits within their own business liability insurance rather than your policy.

Employers Liability for Landlords

If you directly employ anyone, such as a caretaker, maintenance worker or site manager, employers liability insurance is a legal requirement in most cases. GOV.UK guidance states that cover must be for at least £5 million, and that employers can be fined £2,500 for every day they aren't properly insured. There are limited exemptions, for example a family business that is not a limited company and employs only close family members.

Risk 4: Losing Rental Income After a Fire

Loss of rent is a central part of warehouse insurance for landlords, and one of the easiest parts to set too low.

Loss of rent cover pays the rent you lose while the building can't be occupied following damage by an insured event. It is paid for a set indemnity period, which you choose when arranging cover. The question to ask is how long it would realistically take to clear the site, agree the claim, obtain any planning or building control approvals, rebuild and re-let.

For a large warehouse or industrial unit, that can take considerably longer than the time it takes to repair a small shop or office. If the indemnity period runs out before the building is let again, the income stops even though the property is still out of action.

Loss of rent is different from rent guarantee insurance. Rent guarantee is a separate, optional cover that may respond if a tenant fails to pay, subject to tenant referencing, an excess period and policy limits. Loss of rent after damage does not cover a tenant who simply stops paying, and neither cover pays rent during void periods between tenants.

Risk 5: Void Periods and Empty Units

Industrial units often stand empty between lets, and an empty building carries different risks: undetected escape of water, theft of metals and fittings, arson and squatting.

Many policies restrict or change cover once a property has been unoccupied for a number of days set out in the policy. Covers such as escape of water, theft, malicious damage and storm are often removed or restricted, sometimes leaving only fire, lightning, explosion and earthquake. It is important to tell your insurer when a unit becomes empty, rather than waiting for renewal.

Unoccupied cover usually comes with conditions. These can include regular inspections at set intervals, keeping a written log of each visit, draining down water systems, and securing doors and windows. These are often conditions of cover. If they aren't met, a claim may be declined, so they need to be built into how the property is managed while it's vacant.

If a unit is likely to sit empty for some time, unoccupied commercial property insurance is designed for that situation.

Risk 6: Gaps Between the Lease and the Policy

On many commercial lettings, the lease requires the landlord to insure the building and recover the premium from the tenant as insurance rent or through the service charge. But every lease is different, and the wording of the lease and the wording of the policy don't always line up.

Common points of friction include:

  • Who is responsible for insuring plant and machinery and shop fronts. Tenant's improvements usually sit on the tenant's own policy, so check the lease reflects this.
  • Whether the tenant must have their own public liability or contents insurance, and in what amount.
  • What happens to the rent if the building is damaged by an event that isn't an insured peril.
  • Whether the lease requires the tenant's interest to be noted on your policy.

Reading the lease alongside your existing cover, and asking tenants for evidence of their own insurance at the start of the let and at each renewal, helps you spot these gaps early. It also helps your broker shape a commercial landlord policy that matches what the lease actually requires.

Legal expenses insurance can help with the cost of some disputes, such as recovering unpaid rent or a disagreement over repairs, depending on the policy terms.

Risk 7: Compliance Duties That Stay With You

Some responsibilities can't be passed to an insurer or a tenant, and insurers may ask how you manage them.

Under fire safety law, GOV.UK guidance explains that the landlord, owner or occupier can be the responsible person for a building, and that for shared areas the responsible person is the landlord, freeholder or managing agent. Where more than one person has duties, they must work together.

The HSE sets out that the duty to manage asbestos in non-domestic premises can fall on the owner, the landlord, or whoever has clear responsibility for the building's upkeep.

Keeping fire risk assessments and asbestos records up to date protects the people using your building. It also makes for a clearer presentation to insurers when you're arranging insurance.

How Ellis David Can Help

Industrial property rarely fits an off-the-shelf policy. The construction, the tenant mix, any void periods and the lease terms all shape what the right cover looks like, and that is easier to get right with someone who takes time to understand the building and how it's used.

Ellis David has been arranging insurance for over 50 years. We're based on Essex Road in Islington, London, and our UK-based team has 150+ years' combined experience. We have access to 100+ UK insurers and MGAs and 1,000+ products, which gives us room to look for tailored cover for warehouses and industrial units with an unusual risk profile.

Our allegiance is with the client, not the insurer. You can meet the team you'd be dealing with, and there's no call-centre anonymity: you speak to the same people when you renew and if you need to claim.

If you'd like us to review your insurance for commercial landlords, or you're arranging cover for a new warehouse or unit, get in touch.

Frequently Asked Questions

Do Landlords Need to Insure Their Tenant's Stock in a Warehouse?

Usually not. A landlord's policy covers the building, the landlord's rental income and the landlord's liability. Stock, business contents and goods in transit belong to the tenant and are normally insured under the tenant's own policy, but the lease should be checked to confirm who is responsible for what.

What Is Loss of Rent Cover on a Warehouse Insurance Policy?

Loss of rent cover pays the rent a landlord loses while a building can't be occupied because of damage from an insured event, such as a fire. It is paid for an indemnity period chosen when the cover is arranged. It is different from rent guarantee insurance, which is a separate, optional cover for a tenant failing to pay, and neither cover pays rent during void periods.

Is Employers Liability Insurance a Legal Requirement for a Landlord?

It is a legal requirement for most employers in the UK, so it applies to a landlord who directly employs staff such as caretakers or maintenance workers. Government guidance says cover must be for at least £5 million. A landlord with no employees would not normally need it. There are also limited exemptions, for example where the only people employed are close family members.

What Happens if a Warehouse Is Underinsured?

If a policy includes an average condition and the building is insured for less than its full rebuild cost, claims are reduced in proportion. A building insured for 75% of its true rebuild cost would see a claim paid at 75% of the loss. This applies to partial losses as well as total losses.

Does My Insurer Need to Know if My Industrial Unit Is Empty?

Yes. Many policies restrict or change cover once a property has been unoccupied for a number of days set out in the policy. Tell your insurer or broker as soon as a unit becomes empty, and check any conditions, such as regular inspections, that apply while it is vacant.

Why Do Insurers Ask About Composite Panels?

The type of composite panel used in a building's construction, and in particular its core material, can affect how a fire behaves and how insurers assess the risk. Knowing your building's construction details helps your broker present the risk accurately and find an insurer with the right appetite.

What Does Warehouse Insurance in the UK Cover?

Warehouse insurance in the UK can cover buildings, rental income and property owners liability for landlords, depending on the policy. Businesses occupying warehouses may also need separate business insurance for their stock, business contents, equipment, liability and business interruption. The right cover depends on how the premises are used, the lease terms and the risks associated with the business.

Does Business Insurance Cover Warehouse Contents?

Business insurance can include contents insurance for items such as office furniture, computers, machinery and equipment kept in a warehouse. Stock and other stored goods may need separate or specifically arranged cover. Landlords should check their own policy covers the building and any landlord-owned fixtures, while tenants should arrange insurance for their business contents and stock.

Do Warehouse Businesses Need Business Interruption Insurance?

Business interruption insurance can help a warehouse business recover lost income or gross profit following an insured event that disrupts its operations, such as a fire. Depending on the policy, it may also cover certain additional costs incurred to keep the business running. It is separate from a landlord's loss of rent cover, which protects rental income rather than the tenant's trading income.

Can Legal Expenses Insurance Help With Warehouse Property Disputes?

Legal expenses insurance can help cover certain legal costs arising from disputes, subject to the policy terms and limits. For warehouse landlords, this may include eligible disputes involving unpaid rent, tenancy agreements or property repairs. Check which disputes are covered, whether a waiting period applies and whether the insurer must approve legal action before costs are incurred.

Does My Claims History Affect the Cost of Warehouse Insurance?

Yes. Your claims history can influence how insurers assess a warehouse insurance application and the premiums or terms they offer. Previous claims involving fire, theft, escape of water or other insured events may prompt questions about risk management and preventative measures. Insurers also consider factors such as the building's construction, occupancy, security arrangements and the activities carried out on the premises.

Can I Pay for Warehouse Insurance by Direct Debit?

Some insurers and brokers offer direct debit as a way to spread the cost of warehouse insurance across monthly payments rather than paying the full premium upfront. Instalment options may involve additional charges or interest, depending on the finance agreement. Check the total amount payable, any deposit requirements and the consequences of missed payments before choosing a payment method.

Do I Need to Tell My Insurer About Busy Times at My Warehouse?

You should tell your insurer about changes in warehouse operations that could materially affect the risk, including seasonal increases in stock levels, additional staffing or changes to the goods stored. Busy times may increase fire loads, vehicle movements or the likelihood of accidents, depending on the activity. Telling your insurer as these changes happen gives them the chance to review your cover and terms before a claim, rather than after one.

Useful Resources

Enquire Online