Commercial property insurance coverage protects buildings from risks like fire, floods, and damage. But having a policy doesn’t always mean full protection. The type of policy and how accurate your rebuild costs are will determine if you have enough insurance. This will help you avoid a costly shortfall later.
Many think buildings insurance for commercial property covers everything, but policies differ. Some only cover the building. Others add business interruption insurance and liability cover.
So, picking the right policy is key. If you underestimate rebuild costs or miss key details, you may end up paying out of your own pocket for losses.
This guide explains commercial property insurance coverage, common mistakes, and how to check your policy. Whether you are a landlord, investor, or business owner, knowing what is covered, what is not, and how to avoid underinsurance helps you to make an informed decision. If you're new to commercial insurance, start with our introduction to commercial building insurance guide, which provides a simple overview of key policy types and coverage options.
Why commercial building insurance coverage matters
Commercial property insurance coverage helps protect business premises from financial loss caused by damage, theft, or disasters. But, many landlords and property owners believe that a building’s market value is the same as its rebuild cost. This mistake can lead to underinsurance and sometimes large unexpected costs. If you're unsure about the difference, our guide on understanding rebuild cost vs market value explains why these figures are not interchangeable and how this impacts your insurance coverage.
The risk of underinsurance
If the rebuild cost is not accurate, property owners may not get enough money from their insurance after a disaster. A commercial building insurance policy usually covers fire, floods, storms, theft, and vandalism. However, insurers base their payouts on the rebuild cost - not the market value or purchase price. If the rebuild cost is too low, landlords may have to pay the extra costs themselves.
Market value vs. rebuild cost
Factor | Market Value | Rebuild Cost |
What it represents | Sale price of the property | Cost to reconstruct the building |
Influencing factors | Location, demand, rental yield | Materials, labour, demolition costs |
Insurance relevance | Not considered for payouts | Determines the policy coverage |
How to get full insurance cover
Get a rebuild cost assessment – A RICS-compliant valuation makes sure your insurance pays the full rebuild cost. A reinstatement cost assessment provides a precise valuation of how much it would cost to completely rebuild your property, factoring in materials, labour, and compliance with modern regulations. Learn more about why this is essential in our Reinstatement Cost Assessment Guide.
Avoid relying on outdated estimates – Building costs change. If your estimate is too low, you may not have enough cover.
Check what is not covered – Some policies do not include business interruption, loss of rent, or accidental damage.
Make sure your property is fully protected. Check your rebuild cost today.
What does commercial building insurance cover?
A commercial building insurance policy helps protect property owners, landlords, and businesses. However, not all risks are covered. Knowing what is included (and what is not) helps you avoid big costs.
What is typically covered?
✅ Building damage – structural repairs due to fire, storms, floods, and subsidence. ✅ Stock & equipment – stolen or damaged items.
✅ Theft & vandalism – covers break-ins and damage from crime.
✅ Legal costs & liability – pays legal fees if someone makes a claim.
⚠️ Business interruption – covers lost rent or business closure. This is not always included as standard, so it is best to check with your insurer.
Did you know? Many insurers offer commercial building and contents insurance as a single policy. This is often cheaper than buying separate cover for the building and its contents.
If you own a mixed-use property, commercial and residential building insurance protects both business and home tenants.
Extra cover for more protection:
Accidental damage cover – covers sudden, one-off damage, like a broken window or spilled paint.
Terrorism cover – needed in some high-risk areas.
Common exclusions: are you fully protected?
Wear & tear – most policies do not cover damage from age, neglect, or lack of maintenance.
Unoccupied properties – cover may be reduced if a building is vacant for more than 30 days.
Rebuild cost gaps – Insurance pays only up to the rebuild cost. If this is too low, owners may have to pay the rest.
Will your insurance fully protect you? Check your rebuild cost today.
Why rebuild cost accuracy matters
Many commercial property owners assume their insurance covers the full cost of rebuilding. However, without an accurate rebuild cost assessment, they may face a large financial gap if they need to make a claim.
What is a rebuild cost?
Rebuild cost is the total cost of rebuilding a property from scratch. It includes:
Materials & Labour – the cost of building materials and workers.
Demolition & Site Clearance – removing damaged structures before rebuilding.
Professional Fees – payments for surveyors, legal advice, and planning permissions.
How inflation affects rebuild costs
Construction costs rise over time due to inflation, supply chain issues, and higher labour wages. A property insured for £2 million a few years ago may now cost £3 million or more to rebuild. If the insurance policy is not updated, the owner may have to pay the difference.
Case study: broker saves client £39,000
In 2019, a broker helped a client avoid a £39,000 loss by arranging a Rebuild Cost Assessment (RCA). The assessment showed that a property insured for £2 million should have been covered for £3.5 million.
Later, the building suffered £95,000 in damage. Without the updated cover, the insurer would have only paid £56,000, leaving the owner to pay the rest. This case shows the serious risk of underinsurance and the value of a professional rebuild cost assessment.
Common mistakes in commercial property insurance coverage
Many property owners make mistakes when buying insurance. These mistakes can be costly. Knowing what to avoid keeps your property protected.
1. Market value vs rebuild cost
Many landlords believe that market value and rebuild cost are the same, but they are not.
Market value is based on location and demand.
Rebuild cost includes materials, labour, and legal requirements.
If your insurance is based on market value, it may not cover the full cost of rebuilding.
Own a mixed-use property? Get commercial and residential building insurance to cover both business and residential spaces under one policy. If different insurers cover different parts, you may have gaps in protection.
2. Not updating insurance after renovations
Renovations increase rebuild costs.
If you don’t update your policy, your insurance may not cover the new value.
Always make sure your insurance matches your property's true cost.
3. Forgetting business interruption insurance
Building insurance covers damage—but not lost income.
If your property cannot be used, business interruption insurance replaces lost rent or income.
Without it, you could lose thousands while waiting for repairs.
4. Not reviewing rebuild costs regularly
Rebuild costs change due to inflation and rising wages.
Many owners don’t update their insurance, leading to underinsurance.
79% of UK commercial properties are underinsured, meaning they may not get enough to rebuild.
17% are overinsured, meaning they pay too much for cover.
🔗 See our latest underinsurance statistics: Annual Infographic
5. Not checking what your policy covers
Most policies don’t cover wear and tear, poor maintenance, or some natural disasters.
Some require security measures or maintenance checks.
If you don’t meet these conditions, your claim could be denied.
How to stay protected
✅ Check that your policy covers the full rebuild cost.
✅ Update your insurance after renovations.
✅ Get business interruption insurance to protect income.
✅ Review rebuild costs regularly.
✅ Check policy exclusions to avoid claim issues.
Make sure your business is fully protected – check your rebuild cost today.
Protect your property with the right insurance
Making sure your commercial property insurance coverage is correct protects your investment. Many UK properties are underinsured - 79% do not have enough cover. Without an up-to-date rebuild cost check, owners may face big financial losses if disaster strikes.
Key Things to Note
✅ Rebuild cost is not market value – Insurance should cover the full rebuild cost.
✅ Renovations change rebuild costs – Update your policy after any upgrades.
✅ Business interruption insurance helps – It covers lost income while repairs take place.
✅ Regular checks prevent underinsurance – Building costs rise over time, so review your policy often.
Get the right cover with RebuildCostASSESSMENT.com
If your commercial property is underinsured, you could lose money when making a claim. The solution? RebuildCostASSESSMENT.com. We provide affordable rebuild cost valuations to ensure your property is properly covered.
Why Choose Us?
✔ Trusted by RICS – Our assessments follow Royal Institution of Chartered Surveyors (RICS) standards for accuracy and reliability.
✔ Fast & Simple Assessments – We calculate rebuild costs without a site visit using advanced data analysis. This makes the process quick and affordable.
✔ Expert Help for Complex Properties – Our Enhanced Commercial Desktop Assessment includes a consultation with a RICS surveyor to ensure every detail is covered.
Important disclaimer: The information provided here is for general informational purposes only and is not intended as professional advice. While we strive to ensure all information is accurate and up-to-date, the content may not reflect the most current legal or regulatory developments, standards, or practices. No representations or warranties are made (express or implied) about the accuracy of the information provided, and reliance on this information is strictly at your own risk.
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