What is unoccupied commercial property insurance

Jackie De Burca

So, Robert, for those of us who need an introduction about unoccupied commercial property insurance, can you explain please?

Robert Fisher

Certainly. So, unoccupied commercial property insurance- basically, it is what it says on the tin, I suppose, but there are a few key elements to it that differ slightly from an occupied commercial property insurance product. The main ones being that, firstly, the cover is less, and normally the premium is more. So, that’s the main essential part to an unoccupied product.

When I say the cover is less, you have all of your standard perils or causations. For example, fire and flood, malicious damage, storm, whatever it may be- theft, all the usuals. So you have those on a normal policy, but for an unoccupied commercial policy, your coverage is limited to fire, lightning, earthquake and explosion only. So it’s a big difference in terms of coverage. And also, you’ve got your property owner’s liability there as standard for both commercial and empty products. But- that’s the main differences.

And of course, an empty building is a magnet for all sorts of things, be it unsavoury behaviour, all that kind of stuff. So the risk in the eyes of the insurance company goes up, and then as a result, the premium goes up as well. So, in a nutshell, that’s the two main different features for an unoccupied and an occupied property insurance policy.

Jackie De Burca

Okay, perfect. So that’s nice and logical and straightforward. If I was going to approach your company, Robert, for the first time- and it was my first unoccupied commercial property, what sort of- you know, loopholes. Are there any loopholes that I should be aware of, would you say?

Robert Fisher

Loopholes and such- I would say, yes, you could call that for- when we mean loopholes- how with the insurance, can we get out of paying. Should you suffer a loss? And yes, you could call them out. But in the insurance world, I suppose what they’re going to say is- well, we are going to place extra conditions on you, know that there’s a higher risk.

And these extra conditions- maybe, for example, you’re going to have to go and visit the property, maybe every 7 to 14 days. You’re gonna have to clear out the property of maybe any rubbish inside and out. You’re going to have to drain down the water tanks, you’re going to have to turn off the electricity, turn off the gas. So if you like, yes, that’s a loophole. If you don’t do all those things, let the insurer know, and maybe sees that you should be doing or that the policy suggests you must do.

Then that’s a way of them getting out to pay you, your claim. And that could be- if you have a total loss, such as a fire, and you haven’t turned off the electricity, and there’s an electrical fire? Well, lots of loopholes for the insurance company to exploit. And they will try to get out of it, if you’re unfortunate enough to be in that position.

Jackie De Burca

Okay, and normally with something, let’s just take that example of the electricity and the fire- normally in a situation like that, Robert, would it be easy for them to prove that without need for a fair bit of investigation?

Robert Fisher

Well, yeah, in that type of instance, what will happen there is your insurance company will most definitely appoint a loss adjuster. And these guys, they’ve been involved in this thing, week in, week out for many, many years. And there’s ways of finding out, if you’ve obeyed the conditions. And as simple as this, if there is a fire, they’re going to get the fire authority out, and they’re going to be telling the loss adjuster pretty quickly, what’s happened and where the source of the fire was.

So if you haven’t turned off your electric, or- they’re going to be able to tell and go from there. So it wouldn’t be a hard case to find out. So there’s no real point in trying to dupe the insurer in that sense. You just obey the conditions and get on with them. And that said, at the end of the day, they’re trying to reduce their capacity for loss. That’s one of the main features of an occupied commercial property policy is that you do obey the conditions and they are strict for a reason. So yeah.

Jackie De Burca

That’s understandable, obviously. One thing that comes to mind, Robert, are there any tips that you could offer to owners of these unoccupied commercial properties that would help them, for example, maybe on-site surveillance systems. Are there any tips that you would recommend to minimise their policy costs and make it as watertight, if you like.

Robert Fisher

Yeah.

Jackie De Burca

To use- probably not the correct phrase, but you know, to make it as strong in their favour as possible.

Robert Fisher

Yeah, it’s a tricky one. Obviously, insurance policies are all rated due to the risk. Be it the postal code or where it is in the country, and how close you are to a river, how close you are to a cliff. Has it ever flooded in the past? And are there any empty buildings in the area, because empty buildings do tend to suffer from arson, this kind of thing. But in terms of actually trying to adjust your cost? There is little that you can do, there’s no great sort of secret out there, how you can reduce your exposure.

But what you can do is obviously, go to your insurance and say, ‘look, I’m in a Neighbourhood Watch area. If there isn’t a Neighbourhood Watch here, you could certainly inquire to start one off, or go to the authorities. And there’s things like that out there that’re going to reduce your risk. You could obviously let them know you’ve made no claims in the last five years. Make it clear to them if you develop properties, if you’re a landlord, that there’s no claims there, you’ve been doing this thing for quite some time. And so therefore, you have experienced at it and extra things like going around and doing extra visits. So maybe a policy stipulates that you must visit the property every, say 14 days.

You could tell your underwriter, look, I can go around there daily, or I live across the road. There’s very little- that’s going to go over my head, so to speak. So things like that, practical things are very important to your insurer and cleaning out the property itself. Looking at the guttering- do you clean the guttering every year? Do you check your flat roof and maybe submit reports to the underwriter that this is what you do. And really, what they’re going to do is basically gather a picture of what this customer or potential customer is like. Are they a person who is going to take care of the property?

Or are they someone who’s going to live on the other side of the world and let their tenant get on with it and not really sort of try and mitigate any kind of possible claims that may occur. So it’s a difficult one to try and reduce your costs, but really, what insurance companies are wanting you to do is go claim-free and be the type of person that’s going to look after your property. And that’s really it. There’s no real great secret out there as to how to reduce your costs. But unfortunately, that’s the way it is.

Jackie De Burca

Okay, that’s absolutely excellent advice. Robert, thank you so much for taking the time to join us today.

Robert Fisher

You’re welcome. Thank you very much, Jackie. Much appreciated.