Business Buildings and Contents Insurance

Business buildings and contents insurance is a combination of two distinct covers that together protect your commercial premises and everything inside them. Buildings insurance covers the physical structure of your property, including the walls, roof, floors, windows, doors and any permanent fixtures such as fitted kitchens, bathroom suites and built-in shelving. It also typically extends to boundary walls, fences, gates, driveways and underground pipes or cables.

Contents insurance, by contrast, covers the movable items within your premises. This includes office furniture, computers and IT equipment, tools and machinery, stock and inventory, and any other items you use to run your business day to day. Some policies also cover items temporarily taken off-site, such as laptops carried to client meetings.

You can buy buildings insurance and contents insurance as separate policies, but most small business owners find that a combined policy is simpler to manage and often cheaper than buying two standalone covers. A combined policy means one renewal date, one insurer to deal with, and no risk of gaps between policies.

Which cover you need depends on your business setup, specifically whether you own or rent your premises and what assets you keep on-site.

You own your commercial premises

If you own the building your business operates from, you almost certainly need buildings insurance. Without it, you would have to fund the full cost of rebuilding or repairing the structure after a fire, flood, storm or other major event. Your mortgage lender will also require you to hold buildings cover as a condition of your loan. You will likely want contents insurance as well to protect your equipment, stock and furnishings.

You rent or lease your premises

If you rent, your landlord is usually responsible for insuring the building itself. However, you should check your lease carefully, as some commercial leases pass the responsibility (and cost) of buildings insurance to the tenant. Even where the landlord arranges buildings cover, you will still need contents insurance to protect your own equipment and stock, since your landlord's policy will not cover your belongings.

You work from home

If you run a business from home, your standard home insurance may not cover business equipment or stock. You should check your policy wording or speak to your insurer. Many self-employed workers find they need a separate business contents policy, or at least a business use extension on their home insurance, to make sure their tools and equipment are properly covered.

Business buildings insurance protects the physical structure of your commercial property against damage caused by a range of insured events, commonly known as standard perils. These typically include fire, lightning, explosion, storm and flood damage, escape of water from pipes or tanks, subsidence, impact damage from vehicles or falling trees, theft and attempted theft (where forced entry is involved), vandalism and malicious damage, and earthquake.

Your policy should cover the cost of repairing or rebuilding the structure and any permanent fixtures. This includes walls, the roof, flooring, doors, windows, fitted kitchens and bathrooms, built-in cupboards, and wiring or plumbing. Many policies also extend to outbuildings, boundary walls, fences, gates, paths and driveways.

What buildings insurance typically does not cover:

• General wear and tear or gradual deterioration
• Damage caused by poor maintenance or lack of upkeep
• Mechanical or electrical breakdown of plant and machinery
• Damage from pests such as rats, mice or insects
• The first portion of any claim (your excess)

It is worth reading your policy schedule carefully to understand exactly what is included. If your premises face specific risks, such as flooding or subsidence, you may need specialist cover or face higher premiums. A good broker from Money Saving Advisors can help you find the right deal.

Business contents insurance covers the items your company owns or is responsible for within your premises. The scope of cover varies between policies, but most will protect the following categories of property against theft, fire, flood, storm damage and accidental damage:

• Office furniture and fittings - desks, chairs, shelving, display units and reception furniture
• Computers and IT equipment - desktops, laptops, servers, printers and networking hardware
• Tools and machinery - hand tools, power tools and specialist equipment used in your trade
• Stock and inventory - raw materials, work in progress and finished goods held for sale
• Documents and records - paper files, records and data stored on physical media

Many insurers offer optional extensions you can add to your contents policy for extra protection. These commonly include cover for items taken off-site (portable equipment cover), goods in transit between premises, refrigerated stock spoilage for food businesses, and money cover for cash held on the premises. If you run a retail shop, you should pay particular attention to stock cover limits and whether seasonal fluctuations are accounted for. Tradespeople should check whether tools are covered while stored in a vehicle overnight, as standard policies often exclude this.

The cost of business buildings and contents insurance varies widely depending on your premises, location and the value of what you are insuring. As a rough guide, a small office with modest contents might pay from around 150 to 400 pounds per year for a combined policy, while a larger retail unit or warehouse could pay 500 to 2,000 pounds or more.

Several factors affect your premium:

• Rebuild value of the building - the higher the rebuild cost, the more your buildings cover will cost
• Total value of contents - more equipment, stock and furnishings means a higher premium
• Location - premises in areas with higher crime rates or flood risk will cost more to insure
• Construction type - standard brick-built properties are cheaper to insure than timber-framed or flat-roofed buildings
• Security measures - alarms, CCTV, reinforced locks and fire suppression systems can reduce your premium
• Claims history - a clean claims record usually results in lower quotes

Buying a combined buildings and contents policy is nearly always cheaper than purchasing two separate policies. You may also save by increasing your voluntary excess, improving security at your premises, or bundling with other covers such as public liability insurance. Comparing quotes through Money Saving Advisors helps you find the best value for your specific situation.

Underinsurance is one of the most common and costly mistakes businesses make with their property cover. It happens when you insure your building or contents for less than their true value. If you are underinsured and make a claim, your insurer can apply the average clause, which means they will reduce your payout in proportion to how underinsured you are.

Worked example: Suppose your building has a rebuild value of 500,000 pounds but you only insure it for 250,000. You have insured for 50% of the true value. If you then make a claim for 100,000 pounds of storm damage, the insurer can apply average and pay only 50,000 - half of your claim. You would have to cover the remaining 50,000 yourself.

To avoid this, make sure you:

• Use a professional surveyor or the Building Cost Information Service (BCIS) calculator to establish the correct rebuild value, not the market value or purchase price
• Update your contents valuation at least once a year, especially if you have bought new equipment or increased your stock levels
• Tell your insurer about any building alterations, extensions or improvements
• Review your policy limits ahead of busy trading periods when stock values peak

Getting the sums right from the start can save you thousands if you ever need to claim. If you are unsure about the correct values, a broker through Money Saving Advisors can help you work them out.

Shops and retail units

Retail premises typically need higher contents cover to account for stock, point-of-sale equipment and display fittings. You should also consider plate glass cover for shop fronts, stock in transit cover if you receive regular deliveries, and money cover if you handle cash. Shop insurance packages often bundle these covers together for convenience.

Offices

Office-based businesses usually have lower buildings risk but can hold significant value in IT equipment, furniture and data. Pay particular attention to computer equipment cover, business interruption insurance (to cover lost income if your office becomes unusable), and portable equipment cover for laptops and devices taken off-site.

Warehouses and industrial units

Warehouse insurance needs to reflect the value of stock held on-site, which can fluctuate significantly. Check whether your policy covers stock at its maximum value during peak periods. You should also consider goods in transit cover, employer's liability if you have staff, and any specialist machinery or plant equipment cover.

Restaurants, cafes and pubs

Hospitality premises face additional risks from commercial cooking equipment, refrigerated stock spoilage and higher foot traffic. Buildings cover should account for specialist ventilation and extraction systems, while contents cover needs to include catering equipment, furniture and perishable stock. Many insurers offer tailored hospitality packages that bring these covers together alongside public liability and employers' liability.