Commercial Property Insurance for Businesses

Commercial property insurance is designed to respond to physical loss or damage to the buildings, contents, stock, plant and equipment a business owns or is responsible for. Business interruption cover is commonly arranged alongside it, responding to the loss of income that follows when damage stops or slows trading.

Smaller risks are usually written within a business pack, while larger and more complex ones sit under an industrial special risks policy. The two are structured differently. A pack generally lists the perils it covers, whereas an industrial special risks wording covers loss or damage unless it is excluded, which changes where the argument sits when a claim is made.

Annex Risk Advisory is a Perth commercial insurance brokerage. As a commercial property insurance broker, we help businesses work through what needs to be insured and on what basis, review the sums insured and wordings they currently hold, and explore options from a range of insurance markets.

What a policy responds to varies between insurers, and so does the way a sum insured is calculated. Whether a building is insured for reinstatement or for indemnity value, and whether the declared value reflects current rebuilding costs, can matter more at claim time than the premium did at renewal.

Commercial property exposure exists wherever a business owns, leases or is responsible for physical assets. That includes owner-occupiers, investors and landlords, tenants carrying fit-out and glass obligations under a lease, manufacturing businesses with production plant, transport and logistics operators running warehouses and distribution facilities, retailers holding stock, and mining and resources contractors with workshops, yards and stored equipment.

Leases are the usual source of a contractual requirement. A commercial lease commonly sets out which party insures the building, which insures the fit-out and glass, and what limits apply, and those obligations do not always sit where the parties assume. Mortgagees and financiers frequently impose their own requirements as a condition of lending, including being noted on the policy.

Underinsurance is the more common problem in this class. Where the declared value falls short of the actual cost of rebuilding or replacing, an average or co-insurance clause may reduce a claim payment proportionally, even where the loss is smaller than the sum insured. Construction costs in Western Australia have moved considerably in recent years, and sums insured set some time ago may no longer reflect them.

Location matters here more than in most classes. Businesses operating in the north of the state carry cyclone exposure that can affect both availability and terms, and flood is treated separately by most insurers rather than being assumed within storm cover.

Where a lease or a financier sets requirements, the policy needs to be read against the agreement rather than assumed to comply.

Annex takes a risk-first approach. Before approaching any insurer, we work to understand what the business owns and occupies, how it trades, what it holds on site, what its leases and finance agreements require, and what would actually happen to income if a site became unusable.

From there we assist with insurance program design and placement, comparing options across a range of insurance markets and looking at the basis of settlement, the perils or exclusions that apply, sub-limits for items such as removal of debris and professional fees, and the indemnity period selected for business interruption, alongside premium.

Sums insured get particular attention, because they are the input most often carried forward unchanged from year to year. Where values look out of step with current rebuilding or replacement costs, we raise it, and we can point clients toward a formal valuation where the exposure warrants one.

We can also review the insurance obligations in leases and finance agreements to consider whether existing cover aligns with them.

If a claim arises, claims management and advocacy is part of the service, including assistance with documentation and liaison with the loss adjuster, and advocacy for assessment under the terms of the policy. Business interruption claims in particular rest on financial records that are considerably easier to assemble before a loss than after one.

Both directors are active practitioners, so clients deal directly with senior brokers rather than a rotating account team. Cover is subject to insurer approval, policy terms, conditions and exclusions. Annex Risk Advisory is a signatory to the NIBA Insurance Brokers Code of Practice, and our Financial Services Guide and Terms of Engagement are available online.