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Commercial premises like these need Business insurance

Top Tips if you operate from your own commercial premises

Save time and money on your Business insurance if you operate from your own commercial premises.
Skip now to tips on
Impact on your home insurance
Impact on your car insurance
Taking out business insurance
What liability insurance you need
How you can protect your profits

1. Impact on your home insurance


If you use your home for storage or for any other purpose connected with your business, you must inform your home insurer. This will make sure you don’t run the risk of invalidating the insurance you already have on your home and contents. However, it is most likely that this cover will not extend to your business equipment and a separate cover is still needed for this.


2. Impact on your car insurance


If you use your private car for any business purposes – however infrequently you do it – you must inform your car insurer. Your cover can then be changed to include business use. This may or may not result in an increase in your premium. If your insurer is unaware of the position, you run the risk that your car insurance could be invalidated. This means you are then driving without insurance and this is a criminal offence.


3. Building insurance - if you own the commercial premises


If you own the building where you work, you need to arrange insurance on it. It should be insured for the full amount that would be needed to entirely rebuild it as closely as possible to its current form (allowing for site clearance and professional fees of architects etc). You may need to obtain a professional valuation to establish what this figure should be. It’s also vital to make sure that, once insurance has been taken out for this amount, the figure is regularly increased to allow for rises in building costs.


4. Check the terms of the mortgage - if you have one


If you have taken out a mortgage on the building, it will specify the perils that you must insure the building against. If the mortgage only mentions a limited number of perils, it's usually sensible to buy wider cover, such as either fire and all the additional perils available, or "all risks".


5. Building insurance - if you rent the commercial premises


If you rent the building where you work, you need to establish who, under the terms of the lease, is responsible for insuring the building. It will usually be the landlord, and you may be required to pay the premium – for example, as part of the rent.

(The lease may also require you to pay for insuring the rent itself. Rent is insured to make up for the money the landlord would no longer receive from you as rent if, following a fire or other serious damage, you were unable to occupy the premises.)


6. Contents insurance


The furniture, fixtures and fittings, machinery, documents, computers and computer systems you use for your business need to be insured for the full amount that would be required to entirely replace then as closely as possible to their current form. It’s also vital to make sure that, once insurance has been taken out for this amount, the figure is regularly increased to allow for inflation and equipment that is newly purchased or disposed of. Some insurers make provision for this by automatically increasing the sum insured in line with inflation.


7. Terrorism insurance


Most insurance companies exclude terrorism from the standard cover and then charge you extra to include it.
These are the points you need to consider when deciding whether to buy terrorism cover:
  • If you have a mortgage on the building, your mortgage lender may insist you insure the building against terrorism.
  • If you operate from an area that terrorists are likely to target, it would be unwise not to buy the cover.
  • Even if bombs are not detonated, there can be considerable disruption to your business by police cordons etc.
  • Remember terrorist damage doesn’t just occur in major cities – recent events have shown that many bomb factories are in suburban areas and even in blocks of flats.


    8. Business insurance surveys of commercial premises


    Business insurers often conduct their own surveys of the premises they insure. They assess the risk of a fire, theft, flood, etc. and they may also look into the Health and Safety aspects of your business. You may be asked to carry out certain risk improvements after the survey, and in some cases your cover may be dependent on you doing this.


    9. Multi-tenure buildings


    If the building you occupy is shared with other businesses, this could affect the terms of your insurance. For example, an insurer may wish to charge you more premium because one of the other tenants presents a serious fire hazard – on the grounds that a fire could begin in their portion of the building and then spread to your portion. Or it may be a condition of obtaining theft insurance that your part of the premises is adequately secured from the rest of the building.


    10. Do you need Employers’ Liability Insurance?


    This is compulsory by law. You must have Employers’ Liability insurance if:
  • you employ someone (or control their work, eg. work experience people or sub contractors), or
  • you are a limited company (even if you don’t employ anyone else – this is because the limited company is employing you).



    • 11. Do you need Public or Products Liability or Professional Indemnity insurance?


    You will need to insure your legal liability for injury to third parties when they visit your home or when you are out working.

    If you are selling a product, you need to consider Products Liability insurance. This covers your liability at law if one of your products causes injury or illness to someone.

    If you are providing a professional service, you need to consider Professional Indemnity insurance. This covers your legal liability in respect of the advice or services that you provide in a professional capacity.


    12. How you can protect your profits


    It’s vital that any business insurance covers the financial loss you would suffer if you had to stop (or reduce) trading if your property was damaged – for example in a fire. And as recent disasters like the oil storage fire in Hemel Hempstead have cruelly demonstrated, it’s vital too that this includes the loss to your profits caused because of damage at someone else’s property – where this means that you or your customers can’t reach your premises.

    You can also take out insurance in case your business suffers because of damage that occurs at premises occupied by one of your major suppliers or customers. Some policies include this cover automatically, but it's important to check they do. Make sure too that any limit on the size of a claim is adequate - this will depend on how seriously your business could be affected if you lost an important supplier or customer.


    13. Maintain an audit trail


    Keep copies of all your correspondence about insurance, and make notes of any conversations and meetings. This may prove very useful if you need to make a claim, or if a dispute arises about what’s been agreed.


    What we mean by Business insurer, Home insurer and Car insurer

    What next . . .

    The next step Getting new Business insurance - the steps you need to take






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