Commercial Property Insurance: Buildings, Contents and Machinery
Commercial property insurance should reflect what the business would actually need to repair, replace and restart after a major loss. Buildings, fit-out, contents, stock, machinery and tenant improvements can have different ownership, values and policy treatment.
A thorough review also considers debris removal, professional fees, catastrophe exposure and the interruption created while property is unavailable.
For a related check, read commercial property underinsurance risks. You can also discuss your cover through ABS’s building and contents insurance service.
Speak with a business insurance broker
Discuss your operations, property, revenue, contracts, technology and existing insurance program with ABS.
Request a business insurance review
Ask ABS to compare current cover with the risks and dependencies affecting your business.
Commercial property insurance: identify assets and replacement values
Commercial building and contents insurance can cover insured physical loss or damage to described property at specified locations. Separate or additional sections may be required for machinery breakdown, portable property, stock deterioration, glass and business interruption.
business.gov.au identifies property, buildings, equipment, machinery and interruption as common insurance considerations across Australian industries.
Separate Buildings, Fit-Out, Contents and Stock
- Building: structure, landlord fixtures and specified improvements.
- Fit-out and contents: furniture, shelving, computers, tenant improvements and equipment.
- Stock: raw materials, work in progress and finished goods, including seasonal peaks.
- Machinery: production, refrigeration, plant and specialised equipment.
Review the lease to determine what the landlord and tenant must insure. Do not assume the landlord’s building policy protects the tenant’s fit-out, stock or loss of revenue.
Declare every occupied, storage and operating location, including property temporarily away from the main premises where relevant.
Use Replacement Values and Allow for Associated Costs
Market value, book value and insurance replacement cost are different. Rebuilding may involve demolition, debris removal, consultants, code upgrades, escalation and extended construction periods.
Contents and machinery values should reflect replacement with available equivalents, freight, installation, commissioning and taxes where applicable. Imported or bespoke equipment may have long lead times and additional costs.
Obtain professional valuations for significant property and update them periodically. Apply declared-value and escalation provisions correctly and disclose material acquisitions during the policy year.
Review Events, Controls and Business Continuity
Consider fire, storm, flood, bushfire, theft, accidental damage and other events relevant to the location and policy. Flood and catastrophe definitions, sub-limits and exclusions require particular attention.
Provide accurate information about construction, occupancy, sprinklers, alarms, security, storage, hazardous processes, neighbouring risks and maintenance. Machinery breakdown is not the same as external property damage and may require a specialist section.
Finally, connect the property review to business interruption. The cost of replacing assets is only part of the financial impact if the business cannot operate during recovery.
Frequently Asked Questions About Commercial Property Insurance
Does the landlord’s policy cover a tenant’s contents?
Usually this should not be assumed. The lease and each party’s policy must be reviewed for building, fit-out, contents and interruption responsibilities.
Should property be insured for market value?
Commercial property is commonly assessed on a replacement or reinstatement basis, subject to wording. Obtain an appropriate insurance valuation.
Are machinery breakdown and property damage the same?
No. Internal mechanical or electrical breakdown may require a machinery-breakdown section, while external events may fall under property cover.
How should seasonal stock be insured?
Declare peak values and check whether seasonal-increase provisions or variable stock declarations are available.
Is flood automatically included?
No assumption should be made. Definitions, availability, limits and exclusions vary by insurer and location.
Can ABS review multiple locations?
Yes. Provide a location schedule showing occupancy, construction, protections, asset values, stock and interruption exposure for each site.
Protect the Assets and the Time Needed to Recover
Send ABS the property schedule, lease responsibilities, valuations, machinery, stock peaks, security and business-continuity information. We can help review property and interruption protection together.
Important information: This article provides general information only and does not consider your objectives, financial situation or needs. Insurance is subject to policy terms, conditions, limits and exclusions. Legal, contractual and compulsory requirements vary. Obtain advice appropriate to your circumstances.
