Commercial property insurance: what it covers and costs

What commercial property insurance is and who needs it

Commercial property insurance covers buildings used for business, and the contents, stock and equipment inside them, against damage from events such as fire, storm and theft. It is bought by:

  • owners of shops, offices, warehouses and factories
  • landlords of commercial premises
  • tenants, who insure their own fit-out, contents and stock.

The law does not generally require it. In practice a lender will expect the building to be insured, and a commercial lease will usually set out which party insures what. Read the lease before buying.

What is usually covered, and common exclusions

Cover is usually bought as sections of a business package. Larger risks may be written under an industrial special risks policy. Sections can include:

  • building, contents and stock, at replacement cost
  • business interruption or, for landlords, loss of rent
  • glass, theft and money
  • machinery and electronic equipment breakdown
  • property owner's liability.

Common exclusions and limits:

  • flood, unless added. Small business policies use the same standard definition of flood as home policies
  • wear and tear, gradual damage and faulty construction
  • premises left unoccupied beyond a set period
  • theft without forced entry
  • a tenant's property under the owner's policy, and the owner's building under the tenant's policy
  • reduced payouts where the sum insured is well below the true value.

Standard form insurance contracts with small businesses entered into or renewed from 5 April 2021 are covered by the unfair contract terms laws that ASIC administers.

How it is sold, and when a broker is the usual route

  • Brokers: most commercial property cover is arranged by brokers.
  • Underwriting agencies: specialist agencies write property owners' cover, and difficult risks such as vacant buildings, on behalf of insurers including Lloyd's underwriters. Most deal only through brokers.
  • Direct insurers: some sell online packages for small offices, shops and simple landlord risks.

A broker is the normal route once the building is large, has several tenants, has an unusual use, or has been declined. A broker can also split a large sum insured between insurers. Brokers and agencies must hold an Australian financial services licence or be an authorised representative. Check on the ASIC professional registers.

What makes this cover hard or expensive to get

  • Construction with insulated sandwich panels or combustible cladding.
  • Tenants with higher fire risk, such as recyclers, timber yards, chemical stores and commercial kitchens.
  • Vacant or partly vacant buildings.
  • No sprinklers, alarms or security.
  • Old wiring, or asbestos roofing that raises repair costs.
  • Flood, cyclone or bushfire exposure.
  • Past claims.

The government-backed cyclone reinsurance pool, run by the Australian Reinsurance Pool Corporation, covers commercial property policies with a total sum insured of $5 million or less across property, contents and business interruption. It covers cyclone and related flood damage only.

Business policies generally carry a duty of disclosure. Tell the insurer who occupies the building and what they do there, and update it when a tenant changes.

Questions to ask before buying

  • Who insures the building, fit-out and glass under the lease?
  • Is the sum insured based on a current rebuilding estimate, including demolition and fees?
  • Is flood covered?
  • How long does loss of rent or business interruption cover run?
  • What happens if the premises become vacant?
  • Must I tell the insurer about each change of tenant?
  • Are there conditions about alarms, sprinklers or waste storage?
  • How many insurers were approached, and what is the broker paid?

Where to complain

Complain to the insurer in writing first and ask for its internal dispute resolution process. For a problem with a broker's service, complain to the broker.

If the complaint is not resolved, the Australian Financial Complaints Authority (AFCA) is the free external complaints body. It accepts complaints from small businesses with fewer than 100 employees. Its rules cover small business sections such as fire, glass, theft and business interruption. They exclude industrial special risks policies and liability cover. Call 1800 931 678 to check before you lodge.

Find a licensed broker

Browse businesses licensed to arrange general insurance in your city, or search every state.

Sources

Last checked: 2026-10-06

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