Commercial Property Valuation

What do a cozy cafe, a small retail shop, and a towering office building have in common? They all face similar risks when it comes to protecting their property. From fires and floods to theft and vandalism, these unexpected events can disrupt operations—or even force a business to shut down entirely.

That’s why having appropriate commercial property insurance is important. Whether you own or lease your space, your insurance can be the lifeline safeguarding your business from financial fallout.

But before you start insurance shopping, you should first get your commercial property professionally valued.

What is a property valuation?

The estimated market value of a property, which a qualified professional appraiser usually performs. This assessment is based on various factors, which include:

Condition of the property
Existing structures
Location and proximity to other facilities
Market trends
Renovations and upgrades
Size and layout
Valuation of similar properties within the area

There are two main types of property valuations, each serving different purposes. Understanding the distinction between them is crucial to avoid costly mistakes.

Real estate valuation – Used for buying, selling, or securing a mortgage. This type of valuation assesses a property’s sale value, which is influenced by current market trends.
Insurance valuation – Used in insurance applications. It focuses on the cost of rebuilding or repairing a property based on current construction costs.

Insurance valuations are sometimes calculated using a $ per square metre estimate. However, general property valuers may not be qualified to quote rebuild costs. To ensure you’re not underinsured, it’s recommended to consult a surveyor for a more accurate figure.

It’s also important to remember that real estate and insurance valuations can differ significantly, sometimes in millions, and should not be used interchangeably.

Properties in prime location with plenty of foot traffic will also be valued higher.

How can property valuation impact insurance?

Insurers may use the property valuation report to determine what coverage is necessary and calculate the total cost of the premiums they’ll offer. A higher property value can mean more payouts are required in the event of a repair or replacement claim, leading to higher premiums. On the other hand, they may offer lower premiums to properties with lower value. The catch is this may mean less coverage and more out-of-pocket costs in case of a claim.

You need an accurate property valuation to balance adequate coverage and manageable premiums. This would help you avoid the following:

Over-insuring

Securing as much coverage as possible may sound like the safer option. However, insurers typically don’t pay more than the actual repair cost or the property’s market value. If your property is overvalued, this might lead to over-insuring and paying higher premiums for coverage you may not even need.

Underinsuring

Undervaluing your commercial property to pay lower premiums may sound like an easy way to save money, but it won’t help your business long-term. You may end up exposed to the risk of being underinsured in the event of a claim. Payouts from insurers may not cover enough repair or replacement costs, leading to additional financial strain.

Penalty fees

Policies may include a ‘co-insurance’ clause, which requires the property to be insured to a certain percentage of its value. If your property is found to have been undervalued, your insurance company may penalise you with a penalty fee or reduce the payout in the event of a claim.

Legal issues

An inaccurate commercial property valuation may also violate contractual agreements for leasing and mortgage.

Learn more about commercial property insurance by contacting East West Insurance Brokers.

Insurance property valuation determines the premiums you'll need to pay.

How else can I benefit from property valuation?

It’s advisable to have your property professionally revalued every few years or whenever significant changes occur, such as renovations, expansions, or shifts in the local market. This helps you and your insurance provider update your coverage to match your business needs.

Having accurate and up-to-date valuation also minimises disputes during claims because insurers are better equipped to assess losses accurately, ensuring a smoother claims process.

Secure your commercial property

Having an accurate and up-to-date property valuation empowers you to make smart financial decisions while ensuring you have adequate insurance coverage to protect your investment. In business, preparation is everything—and staying ahead begins with understanding the true value of what you own.

Want to learn more about commercial property insurance? Connect with East West Insurance Brokers! Our team of expert insurance brokers can provide valuable insights into commercial property coverage for you and your business. Contact us today to get started!

The first step in getting your commercial property insurance sorted is knowing whether you need it or not. The good news is, this is an easy one.

Why do you need commercial property insurance?
What does commercial property insurance cover?
How much does commercial property insurance cost?
What should I consider when buying commercial property insurance?
What should I watch out for with commercial property insurance?
Where should I go from here?

If you own commercial property of any size or type, then you should consider commercial property insurance. We’re talking anything from an office building to an industrial warehouse, from a cold storage facility to a retail space, and beyond.

If you have financed the purchase, renovation, or fitout of your property then you may actually be required to have property insurance to secure your loan. This can also extend to finance for your contents, stock, or machinery.

Likewise, other contracts you have relating to your property or contents will often contain conditions regarding property insurance, so make sure you have a good look over all of your paperwork. Fortunately, this is something an experienced broker can help you with.

Why do you need commercial property insurance?

You may have just found out that you need to consider property cover, let’s look at why it is a critical part of a sound risk management strategy for any commercial property owner.

You obviously purchased (or are purchasing) this property for a reason, and at the end of the day that reason is to generate future income.

Ask yourself the question – if your property is damaged beyond use, could you afford to repair or replace it without insurance? Or even, would you be able to continue to produce income from your business if the worst did happen?

If you answered no, then you need commercial property insurance to protect your business from these situations.

Commercial property insurance is designed to cover you as an owner, and protect you against exposure to the risks of owning property. That said, not every property policy will suit your unique needs, a qualified broker can assist you in finding the best insurance that covers your needs.

What does commercial property insurance cover?

In general, commercial property insurance covers your property and income for damage arising from tangible events. These can include storms, fire, floods, theft, vandalism and more. There are often optional sections of cover you may wish to add on, such as machinery breakdown, electronic equipment, and general property/tools of trade.

There are two main types of commercial property policies: business pack insurance and industrial special risk (ISR). The most notable difference between the two is that an ISR policy covers your property against damage unless an exclusion is specifically made, whereas a business pack only covers defined events, for example, fire or theft.

An ISR policy may sound preferable, however they are usually only available for property with a combined asset value of over $10 million (some insurers will occasionally consider $5 million).

A broker can help you determine which kind of policy is appropriate for your assets and risks and even tailor cover to fit your situation more effectively.

How much does commercial property insurance cost?

As with all insurance, there are a number of factors that will affect the price of your premium. The average cost of commercial property insurance changes based numerous risk factors considered by insurers. These are all worth keeping in mind when purchasing or making changes to your premises.

The location of your property
The construction of your buildings
The security of your premises
The fitout of your property
The stock held on your property
The equipment held on your property
The size of your property
The age of your buildings
The business activities undertaken at your premises

For more information on how these considerations affect your premiums, and what you can do to avoid higher costs, speak to an experienced broker.

Why do you need commercial property insurance?

What should I consider when buying commercial property insurance?

Any insurance policy will only work effectively when it is suited to the specific circumstances it covers. The most important things to consider are: your property’s unique risks and whether the policy covers those, and whether the limit of the policy would be enough to rebuild the premises and your business if you suffered a total loss.

An off-the-shelf commercial property policy is likely to have exclusions that may make it inadequate for your needs, it may also be missing important additions relevant to your unique situation. A full-coverage policy is another option, but it will cost you more.

Price is obviously an important consideration for any business, though be warned that the cheapest policy rarely provides the best coverage. The excess you set will also impact your premiums, but it should be a realistic amount you can afford if the worst does occur.

On that note, underinsurance is becoming a prevalent concern in today’s market. Having a replacement cost valuation completed will help you determine the amount you need to insure your property for. Also, stay vigilant with property market changes and keep your policy up to date if you make any alterations or additions to your premises or if tenancies change.

At the end of the day, the best insurance for commercial property and how much it costs will come down to your individual space and your business’s specific needs. Fortunately, a qualified insurance broker can assist you in determining those.

What should I watch out for with commercial property insurance?

Make sure you gather as much detail about your property and its construction as possible, as insurers will expect full disclosure of anything that is a concern. This could be something common like asbestos, or something less obvious like a specific brand of cladding or machinery that has a higher risk factor.

Remember that commercial property insurance is separate to liability insurance, while there may be some overlap, it is good practice to have both types of cover to protect your business.

A solid piece of general advice is to review all documents as soon as you get them, you should also be provided a certificate of currency that stipulates your cover limits. Continue to revisit them regularly, particularly if you make a change to the building or tenants.

Finally, revisiting the issue of underinsurance, if you are found to have failed to insure your property for a reasonable value you could be held accountable for a percentage of the repair or replacement costs in the event of a loss. Using a qualified insurance valuation expert to make sure your property is insured for an appropriate amount can protect you against this risk.

Where should I go from here?

If you have determined that you may need commercial property insurance, having a broker do the heavy lifting can be a good assurance, and help make the process easier and more efficient. There are a lot of policy wordings to read after all.

At East West Insurance Brokers our team has several decades of combined experience in commercial property insurance, and we are here to assist you through the process of getting your business appropriately covered, and keeping it that way.

From the initial identification of your unique risks, to customising a policy to suit you and your business, you can trust our friendly and knowledgeable insurance advisors to aid you on your journey.

Get in touch today for a commercial property insurance quote tailored to suit you.