OUR LOCATION
If your business owns the premises you operate from, or you lease to tenants, building insurance is non-negotiable.
Unfortunately, there are some common mistakes that render this type of insurance ineffective. Take a look at the errors people make that can end up being very costly:
Under insuring
It’s very tempting to save money on insurance by failing to declare the true value of your property. If the amount you have declared is less than the cost of replacement or major repair works, you can end up badly out of pocket.
Spending that little bit extra each month to cover yourself for the many costs associated with a rebuild means you’ll have peace of mind in the event of a worst-case scenario. Don’t forget to make sure your insurance keeps up with inflation: a $2 million building in 2015 isn’t a $2 million building in today’s market.
Many insurance policies include an ‘Average’ or ‘Co-Insurance’ clause (also known as the ‘under-insurance’ clause) which means if you insure for less than the full value of the property, a claim can be reduced in proportion to the amount of the under-insurance.
An example of the ‘Average’/’Co-Insurance’ clause being applied is shown below:
Full Replacement Value = $1,000,000
Sum Insured = $500,000
(Therefore, you would be self-insured for 50% of the full value)
Amount of example insurance claim = $100,000
Amount payable by the insurer as a result of the application of the ‘Average’/’Co-Insurance’ clause (ie. 50%) = $50,000
Not considering building improvements
 Insurance can’t be ‘set and forget’. If you upgrade or enhance your premises, you need to check in with your insurer to update your policy and make sure everything is covered.
Lack of comprehensive cover
If your building catches fire or is badly damaged by a storm, you need to be covered for total costs, including rubbish and debris removal, architectural and design fees etc.
No business interruption cover
While it’s not technically building insurance, if something does happen to your premises, your business probably won’t be able to operate. You need to include business interruption cover in your policy; this will cover the financial shortfall and save you from a great deal of stress.
Forgetting about liability
You also need to protect the people who use your building, whether they are visitors or staff. An injury can cost your business in terms of time and money so include liability insurance (and work with a WHS officer to keep the building safe for use and avoid your policy being void).
Not understanding your policy
Being a business owner is stressful and busy but you need to check in with your policies regularly to make sure they offer the right amount of cover. You don’t want to end up over insured and paying for a product you don’t really need.
What’s the best commercial building insurance?
Your building insurance policy should be tailored to your premises and your needs. The cost will be based on your size, location, perceived risk to the business (e.g. are you in a flood or bushfire-prone location) and type of organisation (e.g. are you a warehouse, an office or a high-risk manufacturing facility).
There isn’t a one-size-fits-all solution for building insurance so it helps to work with a broker who understands the different options and can help you find the right cover for your premises.
Once you have a policy in place, schedule regular check-ins with your insurance broker and don’t forget to let them know if things change. You can also talk about:
- Insuring your equipment and inventory
- Insuring goods in transit (freight)
- Insuring items that travel with your team (e.g. laptops)
- Insuring your premises against acts of vandalism or theft
When you have the right building insurance, an incident like a flood or break-in becomes an inconvenience rather than a disaster. You’ll experience interruptions but you will have the money to cover costs and prevent massive financial problems or even the loss of your business.
Need help to set up the right building insurance policy in 2024? Talk to Crest Insurance today.
