If your business has premises, stock, equipment or tools, you need to protect them just as you would your home and belongings. Business contents and commercial property insurance does that. This guide explains what these covers include, who needs them, and how they fit with the rest of your business insurance.
What commercial property insurance is
Commercial property insurance covers the buildings your business owns or is responsible for, against events like fire, flood, storm, escape of water, theft and vandalism. Much like home buildings cover, it pays to repair or rebuild the premises after an insured event, based on the rebuild cost. If you own your business premises, or your lease makes you responsible for insuring them, this cover protects what is often your largest business asset.
What business contents insurance is
Business contents insurance covers the things inside your premises that your business owns: furniture, fittings, equipment, machinery, computers and stock. If these are damaged, destroyed or stolen in an insured event, the cover pays to repair or replace them. For many businesses the contents, from specialist equipment to stock, represent a large investment, and losing them without cover could be enough to stop the business operating, so this protection is important.
Who needs them
Any business with physical premises, equipment or stock should consider these covers. A shop needs to protect its stock and fittings; an office its computers and furniture; a workshop its machinery and tools. Whether you own or rent the premises affects who insures the building, but the contents are almost always yours to protect. Even a home-based or small business has equipment worth covering, as our guide to public liability insurance and other business cover notes.
Own premises versus rented premises
If you own your premises, you generally need commercial property cover for the building as well as contents cover. If you rent, the landlord usually insures the building, but check your lease, as it may make you responsible for some elements, and you will still need to insure your own contents and improvements. Knowing who is responsible for the building avoids both gaps and paying twice, much as with any tenancy arrangement.
Stock cover and its quirks
For retailers, wholesalers and manufacturers, stock is a major asset and is usually covered under contents or a specific stock section. Be aware that stock levels can vary, for example rising before a busy season, so make sure your sum insured reflects your peak stock, or you could be under-insured at the worst moment. Some policies allow for seasonal increases, which is worth asking about if your stock fluctuates through the year.
Equipment, tools and portable items
Equipment and tools may be covered at the premises under contents cover, but items taken off-site, such as a tradesperson's tools in a van or a laptop used elsewhere, may need separate cover for items away from the premises. If your work involves taking valuable equipment out and about, check that it is covered where you actually use it, not just while it sits in your premises, to avoid an unexpected gap.
Business interruption alongside property cover
Damage to your premises or contents can stop you trading, not just cost you the repairs. Business interruption insurance, often added alongside property cover, replaces lost income while you recover from an insured event. It is a natural companion to contents and property cover, because the loss of earnings after a fire or flood can exceed the cost of the physical damage. Many businesses find this income protection as important as covering the assets themselves.
How it fits with other cover
Property and contents cover protect your assets, while liability covers, employers' liability for staff, public liability for the public, and professional indemnity for your work, protect against claims, as our guides to employers' liability and public liability insurance explain. Many insurers bundle these into a combined business policy. Building the right mix, covering both your assets and your liabilities, gives your business proper all-round protection.
New-for-old versus indemnity
Check whether contents and stock are covered on a new-for-old basis, replacing items with new equivalents, or on an indemnity basis, paying their current value after wear and tear. New-for-old gives a fuller payout but may cost a little more. For equipment and stock that you would need to replace to keep trading, new-for-old cover can be valuable. Knowing which basis applies helps you understand what you would actually receive after a loss.
Underinsurance and the sum insured
As with buildings cover, under-insuring your contents or stock can lead to a reduced payout, because insurers may scale down a claim if the sum insured is below the true value. It is important to set the sum insured at the full value of everything you are covering, and to review it as you acquire equipment or build up stock. Taking the time to value your contents properly protects you from a shortfall when you claim.
Security and reducing premiums
Good security can both protect your business and reduce your premium. Alarms, good locks, shutters and, where relevant, sprinklers or fire protection lower the risk of theft and damage, which insurers reflect in the price. Meeting any security requirements in your policy is also important, since a claim could be affected if specified protections were not in use. Investing in sensible security is therefore worthwhile both for safety and for the cost of cover.
Specialist items and higher-risk trades
Some businesses have specialist equipment, high-value stock, or operate in higher-risk trades, and these may need tailored cover or specific terms. Standard policies may have limits on individual items or exclude certain risks, so if your business has unusual or particularly valuable assets, check they are properly covered. A specialist insurer or a tailored policy can ensure the things your business depends on are protected, rather than left under-covered by a generic policy.
Build the right combination
For most businesses with premises, the sensible approach is to cover both the property, if you are responsible for it, and the contents, stock and equipment inside, at their full value and on suitable terms, and to add business interruption so a major loss does not also wipe out your income. Combined with the liability covers your business needs, this gives all-round protection against both losing your assets and being unable to trade while you recover.
In short
Commercial property insurance covers your business premises against insured events, based on the rebuild cost, while business contents insurance covers the equipment, machinery, furniture and stock inside. If you own premises you need both; if you rent, the landlord usually insures the building but you insure your contents. Mind stock fluctuations and items taken off-site, and consider business interruption cover for lost income, since damage can stop you trading as well as costing repairs.
Where to get help and next steps
Read our guides to public liability insurance and employers' liability insurance to build the right business cover. This is general information, not financial or legal advice.