Landlord Commercial Insurance Tips for First-Time Investors

When you’ve invested in a commercial property for the first time, the various tasks involved can seem overwhelming. First, there’s all the admin, the task of finding the right tenants, and the paperwork involved with leasing the premises out. Finally, there’s finding the right insurance. One of your top priorities when you have tenants in place should be protecting yourself and your property from any unfortunate events—and that’s where Commercial Landlord Insurance comes in.

Commercial Landlord insurance is a special type of policy that provides cover for both buildings and the contents within them. It will protect against risks such as fire, flooding, storm damage, and liability from injuries. It can also provide cover in the event that your tenant defaults on rent payments or breaches their lease agreement, as well as providing cover for loss of rental income should a tenant vacate before the end of their lease.

Whilst commercial landlord insurance is not compulsory in Victoria, we believe it is essential for all commercial property owners.
In this blog post, we’ll touch on the different types of insurance policies that usually fall under the commercial landlord insurance bracket in Victoria, we’ll look at how to assess your insurance needs, and provide tips on how to choose the right insurance policy and provider. In addition, we’ll share strategies to lower your insurance costs and help you understand the claims process.

Understanding Commercial Landlord Insurance Victoria

What is landlord commercial insurance?

Landlord commercial insurance is a type of policy that provides coverage for rental properties used for commercial purposes. It’s designed to protect you as a landlord from financial losses due to property damage, tenant liability, and business interruption, amongst other things. Commercial landlord insurance is different from residential landlord insurance because it covers a broader range of potential risks and liabilities.

What are the key coverage areas and types of policies available?

There are several types of commercial landlord insurance policies available. What you will require will depend on factors such as your property’s size and type, the age of your premises, what kind of equipment and machinery you have available for use onsite (if applicable), how your property is being used by the tenant, and more. 

A standard Commercial landlord insurance policy covers property damage, liability coverage, and loss of rental income due to property damage or natural disasters. As part of this, you may add extra types of insurance to cover you for things like burglary, glass damage, machinery breakdown and more. In addition, you can add coverage for specific risks such as floods, earthquakes, and terrorist attacks.

What’s the difference between residential insurance and commercial landlords insurance Victoria?

Sometimes the terms used for these different types of insurance seem very similar, but there are key differences in what, and who, is covered. Here’s a brief outline of what each type of insurance:

• Residential insurance (also called Tenant’s Personal Insurance or Renter’s Insurance) is a type of insurance taken out by the tenant of a residential property, and covers them for damage to their own belongings. It can also include Personal liability insurance which covers the tenant against potential liability arising from the accidental damage they might cause to the home they are renting.
• Residential landlord insurance (also called Domestic landlord Insurance, or simply, Landlord Insurance) provides residential landlords with protection for risks associated with tenants, encompassing scenarios such as loss of rental income, as well as damage or loss of contents and building caused by the tenant in residential lease agreements. It is similar to commercial landlord insurance, however it covers a more narrow range of risks, as the tenant is generally not operating a business out of their residence/your property.
• Commercial tenant’s insurance generally provides coverage for a variety of aspects, including the leased or rented commercial property itself. This type of insurance often includes public liability coverage, as well as coverage for things like internal glass and signs, fixtures and fittings for which the tenant is accountable according to the terms of their lease agreement. Protection against fire and perils is another essential feature of commercial tenant insurance. Note that every commercial tenant’s insurance policy will differ, as it depends on the type of property being insured and the nature of the commercial business operating out of the premises (what equipment is being used and so on). In most cases, landlords ask the commercial tenant to secure insurance for the property and include the landlord as an interested party on the policy. Alternatively, a landlord can arrange the commercial property insurance and ask the tenant to cover the cost of the policy.
• Commercial landlord insurance covers an extensive range of risks, such as the building structure and its contents, and ideally covers landlords for any gaps that the tenant’s insurance does not cover. (Refer to the What is landlord commercial insurance? section above for information on what is generally covered.)

Why you shouldn’t rely on your tenant’s insurance

As part of a tenancy agreement, it’s likely you will require your tenants to take out their own insurance. However, as a commercial landlord, you can’t rely on your tenant’s insurance alone. There are a number of reasons why, and here are some.

• The insurance your tenant takes out will cover them for certain risks and may not include all the risks you, as a landlord, are exposed to.
• The insured amounts your tenant has in their insurance policy might not be accurately determined, leading to inadequate coverage in the face of unforeseen events. 
• Discrepancies in tenancy descriptions could further complicate matters, potentially nullifying your insurance when you need it most.
• Delays in premium payments by your tenants could leave your valuable assets uninsured for periods of time. 

For all these reasons and more, it’s crucial to safeguard your investment comprehensively with commercial landlord insurance.

Assessing Your Insurance Needs

A number of factors need to be taken into account when it comes to purchasing a commercial insurance policy. The insurer or insurance broker will make an appraisal of your property and lease agreement, and help you determine what cover you need. As part of this assessment, they will consider the following. 

The property type and size

When choosing an insurance policy, the type and size of your commercial property will be considered. The insurance coverage required for a multi-unit commercial building is vastly different from the requirements for a single-tenant building. Additionally, the age of the property, and what the property will be used for by the tenant can play a part in determining what types of insurance you will require, as well as the level of coverage. 

Specific risks and liabilities

Identifying specific risks and liabilities related to your property can protect you as a landlord. An insurer or insurance broker will ask that you consider possible risks like a tenant lawsuit, property damage, or business interruption. The risks you face are dependent on your property type, so understanding your property’s liability is a crucial part of determining your cover for landlords insurance Victoria.

The level of coverage required

It’s essential to consider the potential financial loss that can come from a catastrophic event like a fire or a natural disaster when selecting your coverage levels. Also, if you have a mortgage on your property, your lending institution may require you to carry a specific amount of insurance. (To be safe, this should be the minimum level of cover you should consider.) An insurer or insurance broker will help you determine what is an appropriate level of coverage for you as a commercial landlord in Victoria.

Finding a reputable insurance provider

Choosing a reputable insurance company is vital when it comes to ensuring claims are handled in a timely and efficient manner. If you want to put in the legwork yourseld, then look online to check out the financial ratings and customer reviews of the various insurance companies offering Commercial landlord insurance in Victoria.

Factors to consider when comparing insurance providers

Some of the significant factors to consider when comparing insurance providers include the level of coverage they can provide, their quality of service, their expertise in providing landlords’ insurance in victoria, and their price. Get quotations from different companies to compare cost-to-benefit ratios. And make sure you read and understand the terms and conditions, as there may be gaps that become apparent.

Consider working with an insurance broker

If you want to save time and get competitive deals, it can be worth working with a reputable insurance broker with experience in the field of commercial landlord insurance in Victoria. An experienced broker will have honed-in knowledge of the risks commercial landlords face, and existing working relationships with a number of different insurers. This way, you can ensure you get a complete package at a competitive price.

Choosing the Right Insurance Policy

Don’t neglect the terms, conditions, and exclusions

Understanding the terms and conditions of your commercial landlord insurance in Victoria is vital, as it helps ensure you’re getting the right coverage for your property. Make sure to read the terms and conditions attentively to avoid misunderstandings and disputes down the track.

Balance coverage costs with the level of protection needed

Balancing premiums and excess is a nuanced decision. Higher excess often means lower premiums, and vice versa. Find the middle ground by assessing your property’s value. Then decide if you need to increase the premium or if certain excess amounts won’t cover replacement costs.

Your premium might be tax deductible per the Australian Taxation Office (ATO). Ensure you check with your accountant or the ATO to find out how much you can claim.

Considering optional coverage add-ons

Optional insurance coverage add-ons may be available that cover things like terrorism or cyber attacks. Consider if these add-ons are necessary for your property.

Tips for Lowering Insurance Costs

There are measures you can take to reduce your risks as a commercial landlord, and thus, potentially reduce your premiums. Here are some strategies to consider.

Implement risk management strategies

Implementing robust risk management policies, like regular inspections of your commercial property and routine maintenance, can help to mitigate the risk of claims.

Increasing property security measures

Increasing the security of your property may help you to reduce the cost of commercial landlord insurance, as you are reducing the risk of a break-in or loss due to theft.

Bundling insurance policies or increasing deductibles

Bundling insurance policies may entitle you to a discount on your premium. Similarly, increasing your excess may result in lower premiums, but also means you would be responsible for a higher amount in the event of a claim.

Filing Insurance Claims

As a commercial landlord, it’s highly likely you will need to lodge an insurance claim at some stage. There are some things you can do ahead of time that will make lodging a claim easier.

Knowing the claims process and requirements

When taking out an insurance policy, familiarise yourself with the claims process and the requirements for your policy. Knowing the process can help you understand the required steps and expected outcomes, so that you can be sure it has the kind of turnaround time that you need.

Documenting property damage or incidents accurately

Documenting damage and incidents with as much accuracy as possible is essential to ensure that your claim is processed correctly. In addition to this, maintaining accurate information about your property really helps when it comes to claims. Before and after photos and retaining documentation on equipment and fixtures can be useful.

Working with insurance adjusters and contractors

Working with an insurance adjuster and qualified contractors is essential in making sure that you receive the coverage amounts determined in your policy. This involves flagging any changes that take place with a tenancy, or with the property itself, to your insurer, so that they can swiftly adjust your policy and premiums to accurately reflect the new situation.

Conclusion

As a first-time investor in commercial property, carrying commercial landlord insurance ensures that you are protected against financial risks. Commercial landlord insurance protects your property from tenant liability, property damage, and business interruption, and can include a number of extras that may be relevant to your particular situation.

Whilst choosing the right policy and provider can be challenging, there is help out there in the form of an insurance broker, who understands commercial landlord insurance in Victoria, and can help you find the best policy for you.

In addition to selecting an insurer, understanding the coverage needed and the policy terms and conditions will help guarantee the policy you choose is suitable for your property. 

Whichever provider or policy you choose, implementing risk management strategies and other cost-saving measures can help lower your premiums and save you money in the long run.

Steadfast Eastern Insurance Brokers – Specialists in Commercial Landlord Insurance in Victoria

At Steadfast Eastern Insurance Brokers, we understand that finding the right commercial landlord insurance in Victoria can seem complex, which is why we have a team of experienced advisors on-hand to help you pinpoint the best policy for your circumstances. If you would like more information about commercial landlord insurance in Victoria, please don’t hesitate to contact us. We will be happy to answer any questions you may have.

Don’t leave yourself exposed—make sure you get the right level of protection with commercial landlord insurance now.