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What Commercial and Industrial Property Insurance Covers
Commercial and industrial property insurance covers the building, the landlord's fixtures, the rental income and the owner's liability for a property that is let to other businesses: an office building, a shopping centre, a strip of shops, a warehouse, a medical suite, a childcare centre, a service station or a data centre. The tenant insures the trade; the owner insures the asset.
The property risks are fire, explosion, storm, flood, water damage, theft and malicious damage, and the older the building the more the switchboard, the roof and the plumbing matter. Owners also carry what their tenants do: a tenant's process can raise the fire load, a visitor can be injured in the car park, and an industrial tenant can leave a pollution problem behind.
A serious loss stops the rent. The building cannot be occupied, repairs and rebuilding run for months, and the owner keeps paying the loan. A loss of rent section replaces the income for the indemnity period, and the owner's public liability insurance answers injury and damage claims from tenants, visitors and the public. Most leases also oblige the tenant to hold its own cover, and we check that the two policies meet without a gap.
Fortis Risk Solutions arranges commercial and industrial property insurance for owners across Australia from offices in Box Hill and Hawthorn, as part of our business insurance range. We look at construction, fire protection, the tenancy schedule and the lease terms before going to insurers. Single buildings start with commercial property owner insurance; larger holdings move to industrial special risks.
Who this covers
Occupancy drives the rating of a let building. The notes below show what changes for each type of property.
Office buildings
Lifts, air conditioning, glazing and a long tenancy schedule. Building, loss of rent, machinery breakdown of plant and the owner’s liability for common areas and the car park form the base, and the lease sets who insures the fit-out.
Shopping centres
Many tenants, high foot traffic and food premises on site. Public liability for the mall, the car park and the loading docks matters as much as the building, and the tenant mix, from supermarkets to restaurants, changes the fire rating. Loss of rent should cover the time to re-let after a major loss.
Strip retail
A row of shops under one owner, each with its own trade. The owner insures the structure, the roof and the services, the tenants insure their fit-out and stock, and the lease decides the glass. See the retail strip shop insurance page for the tenant side.
Warehouses and factories
High fire loads, racking, forklifts and industrial tenants. Construction, sprinklers and what the tenant stores drive the premium, and pollution and contamination left by a tenant are a real exposure for the owner. The warehouse insurance page covers the operator side.
Industrial estates and distribution centres
Several buildings, several tenants and declared values that outgrow a packaged wording. These portfolios usually move to industrial special risks, with loss of rent and the interruption basis negotiated for the estate.
Mixed use property
Shops below, apartments above, sometimes an owners corporation in between. The owner’s policy, the strata policy and the tenants’ policies have to meet without gaps, and the residential part brings landlord exposures such as tenant damage and rent default.
Medical property and clinics
Consulting suites, specialist fit-outs and vulnerable visitors. The operator holds the professional liability; the owner holds the building and the liability that comes with owning a clinic, and insurers rate the occupancy differently from an office.
Hospitality property
Hotels, pubs and restaurants as buildings. Commercial kitchens, liquor service and late trade raise the fire and liability rating, and the lease should make the operator responsible for flue cleaning and fire suppression. Loss of rent is set on a long rebuild.
Childcare centres and kindergartens
Purpose-built premises, strict fire and evacuation requirements and a vulnerable population. The owner insures the building and the landlord liability; the operator insures the service. See the childcare centre insurance page for the operator side.
Aged care and supported residential services
Residential care buildings with specialised fit-outs, nurse call systems and fire protection. Rebuild cost and the time to re-house residents after a loss drive the sums insured and the loss of rent period.
Student accommodation and rooming houses
Many occupants, shared facilities and high turnover. Fire, malicious damage and liability for common areas are the recurring claims, and registration requirements for rooming houses affect the cover insurers will offer.
Service stations and convenience stores
Fuel storage, forecourt liability and environmental exposure. Underground tanks, pollution and the fuel supply agreement all shape the owner’s policy. See the service station insurance page for the operator side.
Large scale retail facilities
Bulky goods centres, homemaker hubs and big box retail. Large roof areas, storm and hail exposure, and tenants holding high stock values drive the rating, and the owner’s liability covers extensive car parks and loading areas.
Church and faith organisation property
Heritage buildings, halls and manses used by congregations and community groups. Rebuild cost for heritage fabric, public liability for the many groups that use the property and the volunteer activity on site set the cover. See the faith and not-for-profit organisations insurance page.
Data centres
High value plant, uninterrupted power, cooling and tenants whose business stops the moment the building does. Machinery breakdown, business interruption and the contractual liability to tenants dominate, and the specialist markets for this risk are small.
Commercial and Industrial Property Insurance: Cover Sections and Benefits
Commercial and Industrial Property Insurance FAQs
The structure, the roof, the services, the landlord's fixtures, the rent and the owner's liability. A tenant's business insurance covers fit-out, stock, contents and the liability of the trade. The two sit on the same building and each side needs its own; the lease usually says who insures the glass, the air conditioning and the fit-out, and the policies should follow the lease.
On the cost to rebuild today, not the purchase price or the market value. The figure should include demolition and debris removal, professional fees, the cost of meeting current building codes and the inflation that runs through a long rebuild. Underinsurance is the most common reason a property claim pays less than expected, and a valuation every few years is cheaper than finding out at claim time.
A loss of rent section pays the rent the owner would have received while the building cannot be occupied because of insured damage, for the indemnity period set in the schedule, the owner's version of business interruption insurance. It does not pay for a tenant who leaves for other reasons or defaults on the lease. The indemnity period should cover the rebuild plus the time it takes to find a new tenant, which for a specialised building can be well over a year.
Occupancy drives the rating. A childcare centre or a clinic brings a vulnerable population, specific fire and evacuation requirements and liability claims that insurers treat differently from an office. The operator holds the professional and care related liability; the owner holds the building and the liability that comes with owning it. Both policies need to name the occupancy accurately.
Once the declared values, the number of sites or the tenant mix outgrow a packaged property wording. Industrial special risks insurance covers damage from any cause not excluded, across every declared location, with the perils, excesses and the interruption basis negotiated for the portfolio. It is the usual home for industrial estates, distribution centres and large retail facilities, while a single tenanted shed starts with warehouse insurance.
Property wordings turn on occupancy declarations, construction details, flood definitions and the loss of rent basis. FRS helps you declare the tenancies and the construction accurately, set building sums insured on rebuild cost, compare insurers who write let property and act as your advocate at claim time. We also read each lease, so the owner's policy and the tenant's policy meet without a gap.
Related pages
Dedicated pages in this group: Warehouse Property Insurance, Service Station and Convenience Store Insurance, Loss of Rent Insurance
Related industry groups: Property and Real Estate Insurance, Trade and Logistics Insurance, High Value and Complex Business Insurance
Talk to a broker about Commercial and Industrial Property Insurance
Call 03 7046 3766 on weekdays between 9:30am and 6pm, email admin@fortisrisksolutions.com.au, or send an enquiry and a broker from our Box Hill or Hawthorn office will come back to you about commercial and industrial property insurance. Tell us what the business does and what the lease or contract asks for, and we take it from there.