Business buildings insurance

A clear guide to protecting your business property

Business buildings insurance protects the physical fabric of your premises if it is damaged by an insured event such as fire, flood, storm, escape of water, impact, or vandalism. For many UK firms, the building is the backbone of operations. If it is damaged, cash flow, customers, and staff can all be disrupted. A policy is designed to fund repair or rebuild costs and help you recover in a structured, predictable way.

Across the UK, a significant protection gap persists. Many small and medium sized enterprises have either no cover or not enough, despite fires and explosions being leading causes of high value losses. Commercial properties are regularly found to be insured for less than the true rebuild cost, which can reduce claims through the average clause and slow recovery. Weather driven events are also rising, with storms and floods increasingly common during UK winters and springs.

The goal of this guide is to set realistic expectations. We explain what buildings insurance normally includes, where exclusions can apply, and how claims generally work. We also outline how to estimate an accurate rebuild value and the practical steps to take before you buy. You will not find sales talk here, only clear information to help you choose cover that fits your needs and budget.

Many UK commercial properties are underinsured, leaving businesses to fund a shortfall after a claim.

What is covered and how policies operate

Most policies cover the cost to repair or rebuild the structure of your premises following insured damage. That includes walls, roofs, floors, fitted fixtures, gates, and outbuildings. Cover can extend to debris removal, professional fees, and site clearance. Business interruption is often purchased alongside buildings insurance to protect revenue if damage stops you trading. Liability sections can be part of a package policy, covering injury to third parties or damage to their property.

Typical exclusions include gradual wear and tear, poor maintenance, defective design, or pre existing damage. Flood may be restricted in some high risk zones. Subsidence is usually optional for certain property types and can carry a higher excess. Policies covering unoccupied buildings often require additional security, regular inspections, and may exclude escape of water unless systems are drained.

Claims follow a straightforward process. You notify your insurer quickly, take reasonable steps to mitigate further loss, and provide estimates and evidence. An assessor may visit to confirm damage and agree repair methods. If the property is insured below its true rebuild cost, the average clause may reduce the payout proportionately. For example, if you insure for 70 percent of the rebuild cost, a claim can be reduced by roughly the same percentage. Accurate sums insured are therefore critical.

Who is this suitable for

Business buildings insurance is essential for freeholders who own their commercial premises, including shops, offices, warehouses, workshops, hospitality venues, and care settings. Landlords who let units to tenants also require it, and lenders typically insist on cover as a loan condition. Firms with higher physical risk exposures, such as manufacturing or storage, benefit from robust protection due to the higher likelihood and cost of fire related claims.

Leaseholders may only need to insure tenant improvements if the freeholder already arranges buildings cover. Home based businesses operating from a residential address should check that home insurance allows business activity or consider a specialist policy. If your business has no physical premises or relies primarily on remote services, buildings insurance may not be necessary, though contents, equipment, cyber, or professional indemnity could still be relevant.

Choosing your level of protection

1. Core buildings cover

   • Protects the structure against insured perils like fire, storm, flood, and escape of water.
   • Include professional fees, debris removal, and site clearance within the sum insured.

2. Standard plus with business interruption

   • Adds loss of gross profit or revenue following insured damage.
   • Choose an indemnity period that reflects realistic repair times. For complex rebuilds, 18 to 36 months can be prudent.

3. Comprehensive with liability sections

   • Packages buildings with public liability and property owners liability, often up to £10 million.
   • Suitable for multi occupancy sites and landlords with visitor exposure.

4. Subsidence and ground movement

   • Optional where relevant. Higher excesses are common. Often vital for certain soil types or older buildings.

5. Accidental damage extension

   • Covers one off mishaps such as drilling through a pipe. Not a substitute for maintenance.

6. Cyber and data risks

   • Separate or add on. Only a small share of UK firms hold standalone cyber cover despite rising threats. Consider it if you store customer data or rely on digital systems.

7. Engineering inspection and breakdown

   • Useful for lifts, pressure systems, and plant. Complex projects can see firmer underwriting even in competitive markets.

8. Terrorism cover

   • Optional extension that can be important in city centre and high footfall areas.

9. Index linking and day one uplift

   • Protects against inflation and cost spikes. Day one often adds a percentage buffer to your declared rebuild value.

Prices and what shapes your premium

Prices vary by insurer and risk profile. Insuring to the correct rebuild value is crucial to avoid underinsurance. Competitive market conditions have recently reduced rates for many standard property risks, though complex engineering exposures may not see the same benefit.

Eligibility and insurer requirements

Most UK businesses that own or are responsible for commercial premises can apply. Insurers will ask for the full address, construction details, age of the building, occupancy, security, and risk controls. They typically require a rebuild cost based on a professional valuation or a recognised calculator. Photographs, maintenance records, and evidence of electrical and gas inspections can support underwriting.

Common restrictions include significant unrepaired damage, ongoing structural movement, or buildings that are largely vacant without enhanced security and inspection regimes. High flood risk locations may require specialist terms or higher excesses. Material misrepresentation, undeclared refurbishments, and unsafe storage of flammables are frequent reasons for declined quotes or claim issues. Regularly review your sums insured, especially after renovations or changes of use, to stay aligned with policy conditions.

From quote to claim - simple steps

1. Gather property details, past claims, and an up to date rebuild estimate.
2. Request quotes with consistent cover limits and clearly stated excesses.
3. Compare inclusions, exclusions, and any average clause wording carefully.
4. Select optional add ons that match real risks, not nice to haves.
5. Buy the policy and set diary reminders for inspections and renewals.
6. Implement risk improvements such as alarms, sprinklers, and housekeeping.
7. Report incidents promptly, mitigate further loss, and document damage.
8. Work with the loss adjuster to agree repairs and monitor progress.

Weighing up the upsides and trade offs

Check these details before you buy

Start with an accurate rebuild value based on a professional assessment. Many UK commercial properties are insured for less than the true cost to rebuild, which can significantly reduce any claim. Ask whether the policy includes professional fees, debris removal, and site clearance within the sum insured or in addition to it. Confirm flood, storm, and escape of water limits and excesses, especially in higher risk postcodes.

Review subsidence terms, minimum security requirements, and any obligations for unoccupied periods such as draining down water systems and weekly inspections. Understand index linking and whether a day one uplift applies. Check the length of any business interruption indemnity period if you add that cover. At renewal, compare like for like and check for changes in terms or pricing, as market conditions move over time.

Alternatives and related cover

1. Contents and stock insurance
   • Protects fixtures, fittings, and goods inside the building. Suitable for tenants or where the freeholder insures the structure.
2. Business interruption insurance
   • Covers lost revenue or gross profit after insured property damage. Essential where cash flow would quickly suffer.
3. Property owners liability
   • For landlords responsible for common areas and visitor safety. Often paired with buildings.
4. Cyber insurance
   • Addresses data breaches, ransomware, and business interruption from cyberattacks. Increasingly important for digital operations.
5. Professional indemnity
   • Protects against claims for professional mistakes. Useful for service and advisory firms.

Frequently asked questions

Q: What is the difference between rebuild cost and market value? A: Rebuild cost is the amount to reconstruct the property, including materials, labour, fees, and clearance. Market value reflects what the property might sell for. Insurance should be based on rebuild cost, not market value.

Q: How do I avoid underinsurance? A: Get a professional valuation, include fees and debris removal, use index linking, and review sums insured after refurbishments. Day one uplift can add a buffer against inflation and cost spikes.

Q: Are floods always covered? A: Flood is commonly included, but terms vary by postcode and risk level. Some high risk areas carry higher excesses or require specialist underwriting. Always confirm the excess and any limitations before purchase.

Q: Do I need business interruption as well as buildings cover? A: Buildings pays to repair the structure. Business interruption helps with lost revenue and ongoing costs while you recover. Many firms buy both to support continuity after a major loss.

Q: What happens if rates in the market fall after I buy? A: You can review terms at renewal and compare quotes. Competitive markets may bring lower rates for standard risks, but specialist or complex risks may not benefit to the same degree.

Q: Is cyber risk included in buildings insurance? A: No. Buildings covers physical damage to the premises. Cyber insurance is a separate product that addresses data breaches, cyber extortion, and related interruption costs.

Q: How quickly are claims paid? A: Timelines vary by complexity. Prompt notification, clear evidence, and agreed repair scopes help. Large losses may involve a loss adjuster and staged payments tied to works progress.

What to do now

Gather accurate property details, confirm your rebuild value, and list the cover sections you genuinely need. Compare quotes on a like for like basis, paying close attention to exclusions and excesses. Take your time, ask questions, and only proceed when the terms make sense for your business.

Important notice

This guide provides general information, not personal financial advice. Policy features, limits, and exclusions vary by insurer. Always read the full policy wording and schedule, and seek professional guidance if you are unsure about suitability.