Michael Sears, a member of the NAEA Commercial Advisory Panel and Propertymark Board, has issued a warning against complacency regarding commercial buildings insurance, emphasizing the importance of preventing invalidated claims.
Sears stresses the significance of ensuring the accuracy of the insured property’s description and the adequacy of insured sums when arranging a policy. He advises landlords to meticulously review their policies, particularly the schedule, to ensure they align with the requirements of their property and business.
Additionally, Sears emphasizes the necessity of promptly notifying the insurance company about any changes during the policy term to avoid unintentionally violating contractual terms. Such changes could encompass alterations to business processes or activities, updates to security or fire installations, modifications to leases or tenancy agreements, and periods of unoccupancy.
Furthermore, Sears recommends that agents encourage landlords to consult with their insurer if uncertain about whether certain changes constitute material facts. He underscores that policy alterations can be made as necessary, not solely during renewal periods.
Understanding Owner’s Obligations
Similar to residential home insurance, commercial insurers expect policyholders to adhere to legal requirements and maintain essential documents and upkeep. This includes ensuring up-to-date electrical inspections and gas safety certificates, having leases or contractual tenancies in place, and compliance with relevant fire safety regulations, such as the Regulatory Reform (Fire Safety) Order 2005 in England and Wales, or analogous laws in Scotland or Northern Ireland.
Clarifying Tenant Responsibilities
Sears emphasizes the importance of agents ensuring tenants receive a copy of the insurance policy documents and comprehend the conditions they must adhere to at the beginning of the tenancy or whenever a new insurance policy is enacted. The nature of the business conducted on the premises can influence the terms of the insurance contract. For instance, tenants operating restaurants or takeaways may be required to clean filters, traps, or other grease removal devices regularly, while workshops engaging in hazardous activities might need to implement enhanced fire safety measures and ensure safe storage of tools and materials.
Safeguarding Unoccupied Premises
Insurers stipulate various grace periods, but maintaining cover for unoccupied sites necessitates meeting specific conditions. These conditions often include maintaining minimum security standards (including regular site inspections), draining water systems or maintaining a minimum temperature of 15°C, and switching off electricity and gas at mains unless required for security purposes.
