Your business property is your home away form home. It is where you do your best work. Whether you’re in the business of providing expert advice to clients or serving up the best lattes in town, if the building you own was damaged by an unexpected event, like fire, storm or vandalism, how could your business keep operating?
We will be taking a closer look at what the basics and blueprint of Building Cover are. This is the type of insurance that you should have if your commercial property is commercial.
What is Building Cover?
Building Insurance covers damage to your property. It can also cover costs for rebuilding or repairing your premises after a fire, storm, or other perils. The policy you choose to buy will specify the specifics.
It is not necessary.
You can only get building coverage if the business premises are yours. An assessor might be called in to perform a property valuation as part of an insurance assessment. This type of coverage may not be suitable for you if your business is a tenanted. Your landlord may take out this insurance to protect the property.
What does it protect you and your business?
Every insurance policy has its own list of covered events and exclusions. It is important to verify the details of your Building policy with your insurance company or the policy wording. Some items are covered by insurance policies include:
- Property owned by a business
- Fittings and fixtures
- Services for the building
- Structural improvements include fencing, gates and roadways.
The policy does not cover any damage to your contents, including stock, furniture, machinery, and other equipment.
- Here is a list structures not typically covered by a standard Building Insurance policy:
There are many factors that influence how your premium will be calculated, as with all types of insurance policies. The premium cost will be higher if your business is more at risk.
The size of your space will determine how much you pay for your premium. A large factory, for example, will usually attract a higher premium than a small shop.
Security: What security measures have your taken to secure your building? You might be able to lower your premium by installing security measures such as CCTV and monitored alarms, and steel grills on doors and windows.
The location of your property can have an impact on the premium. Postcodes that have seen a lot of claims from theft, vandalism, extreme weather, and other factors may attract a higher premium.
Your property’s age: factors such as when and if it was last wired can impact your premium. Older buildings are more costly to insure and can be considered a higher risk.
There are risks associated with different types of business operations. An office space is different than a retail or hospitality establishment.
How your building is constructed: This factor is also considered by underwriters when calculating your building insurance premium. Some construction materials, such as asbestos and EPS panels, may be considered higher risk. Asbestos and EPS panels are considered to be more dangerous because of their combustibility.
Period of inoccupancy: Any period of more than 90 consecutive days in which the business premises are unoccupied.
Many small business owners make the common mistake of underinsuring assets and property. However, it is possible to avoid this error with some guidance and care. Underinsurance is defined by the Insurance Council of Australia as:
“When the amount you have insured your property for does not cover the full cost of the items that you are insuring.”
These are the facts you need to know about underinsurance
- How is underinsurance calculated? While it may seem like a quick way to save some money, insuring your property at a lower value than its actual worth could have disastrous financial consequences.
Let’s assume that the real replacement value for a building is $200,000, but that it is only insured for $100,000.
You would not be entitled to recover more than 10% of the sum insure. The following formula would calculate the amount that could possibly be recovered if $40,000 was lost.
$40,000 (loss amount) x $100,000 (the amount insure) / (80% of $200,000 = true replacement value) = $25,000
To cover a loss of 40,000.00, your insurer would only pay $25,000 to you. It is not worth the effort to underinsure your property.
- Learn your policy. Know what you’re covered for, and equally important, what you aren’t.
- Add costs to your rebuilding costs.
- Make sure your policy is up-to-date. Regularly review your Building policy. This should be done annually in order to make sure you have enough coverage in case of a catastrophe. When calculating the coverage you need, keep in mind things such as general property values and renovations that your building may have undergone.