PropList Blog
Who Should Pay for Insurance on a Commercial Property?

When leasing or letting a commercial property, one of the first (and most important) questions is: who pays for the building insurance – the landlord or the tenant?

In most cases, the responsibility for paying building insurance lies with the landlord, but tenants may also be involved depending on the lease terms.

Landlords typically arrange and pay for the insurance, then recover the cost through service charges. However, tenants may need to cover additional policies, such as contents or business interruption insurance. It's essential to review the lease carefully to fully understand your responsibilities, as the details can vary.

As commercial property experts, we’re here to simplify things. In this guide, we’ll explain what commercial property insurance covers, who typically pays, and how both landlords and tenants can manage costs effectively. Whether you’re a tenant trying to protect your business or a landlord safeguarding a valuable asset, understanding your responsibilities under a commercial lease is essential – so let’s dive in.

Who is Responsible for Commercial Building Insurance: Landlord or Tenant?

In most commercial leases, the landlord arranges and pays for the building's insurance, then recoups the cost from the tenant through service charges. This ensures the property is properly protected to the landlord’s standards.

However, tenants are usually responsible for insuring their own contents, stock, and business operations. They may also need to pay for additional policies (like public liability), depending on their business. 

Let’s look at these commercial lease insurance responsibilities in greater detail:

Landlord’s Responsibility

In most commercial leases, it’s the landlord who arranges and pays for the building insurance. This is usually spelled out clearly in the lease and forms a core part of their role as the property owner. 

The main reason is simple: as the legal owner, the landlord has a duty to protect their investment. Building insurance helps safeguard the property against damage or loss, keeping the asset’s value intact. It’s also an essential risk management tool, covering the cost of repairs or even total rebuilding in the event of something unexpected. 

On top of that, landlords are usually more experienced in dealing with insurers, which means they’re better placed to choose the right policy and make sure the building has the right level of cover.

Tenant’s Responsibility

While landlords usually take care of building insurance, tenants aren’t completely off the hook. In many cases, they’ll still have some responsibilities when it comes to cover. For example, it’s common for tenants to contribute towards (or even fully cover) the cost of the landlord’s policy through service charges, even if the insurance isn’t technically in their name. 

Also, if a tenant has invested in major improvements, like adding new structures or fitting out the space with custom facilities, they may need to insure those additions separately. 

Businesses in higher-risk industries also can’t always rely on the landlord’s standard policy, as it may not cover their specific operational risks, meaning they’ll need to arrange extra, specialised cover. 

Finally, it’s worth paying close attention to the small print: some leases include clauses that quietly shift more responsibility onto the tenant than expected. That’s why it’s always wise to review the lease carefully—and, ideally, get legal advice—before signing.

What Does Commercial Property Insurance Cover?

While commercial building insurance primarily covers the cost of repairing or rebuilding a property after damage, the specific risks included can vary widely between policies. Some threats are straightforward to insure against, while others may require additional or specialist cover. 

Here are some of the most common areas of protection in commercial building insurance policies:

• Natural Disasters – Natural events like fire, floods, storms, and in some cases, less common disasters like earthquakes.
• Man-Made Damage – Deliberate or criminal acts, including vandalism, burglary, arson, and other malicious acts. 
• Accidental Damage – Issues like burst pipes, electrical overloads, and failures in essential equipment or facilities. 
• Explosion – Damage caused by gas leaks, faulty equipment, or other high-impact incidents.
• Impact Damage – Vehicles colliding with the premises, falling trees, or debris from nearby works.

Although most building insurance policies offer broad coverage, they often include exclusions and limitations (like any insurance policy). Some may, for example, exclude minor accidental damage, neglect-related issues, or specific high-risk scenarios. That said, most business insurance options for commercial properties will offer optional extras such as:

• Business Interruption Insurance – Loss of income if the business premises become unusable due to insured damage.
• Contents Insurance – Movable assets like furniture, equipment, and stock belonging to the business.
• Employers' Liability Insurance – Claims of negligence, injury, or damage linked to the premises.
  

Understanding exactly what your commercial property insurance covers, and where it might fall short, is super important for both landlords and tenants. And to ensure that your business or investment can withstand unforeseen events without devastating financial consequences, it’s simply wise to review policies carefully and add protections where needed.

How Much is Commercial Property Insurance in the UK?

Premiums for business property insurance vary widely depending on:

• Property size, location, and usage
• Construction materials and the age of the building
• Security measures (alarms, CCTV, sprinklers)
• Business type and level of risk
  
  

Average costs range from a £300 monthly premium for a £200,000 rebuild cost to £1,000+ for more complex sites and high-risk industries.

What Happens if You Don’t Have Commercial Property Insurance?

Operating a business without commercial property insurance presents a huge risk for both landlords and tenants:

For Commercial Landlord – Without coverage, you’re solely responsible for repair or rebuilding costs if the property suffers damage from fire, flood, vandalism, or any other event. This could amount to hundreds of thousands in unexpected expenses. Additionally, if the property becomes uninhabitable, you may lose rental income for months or even years. Some lenders also require proof of insurance as part of your mortgage conditions – failure to maintain it can trigger loan defaults or legal action.

For Commercial Tenant – Running a business from an uninsured or underinsured property puts your livelihood at stake. If damage forces you to close, you could face extended downtime, loss of stock, and significant financial strain. In extreme cases, lack of insurance can lead to bankruptcy. Moreover, many commercial leases require tenants to ensure the premises are adequately insured; breaching this condition could result in eviction or legal disputes.

Ultimately, skipping insurance isn’t just a gamble – it can destroy your investment, business, or both.

Handling Denied Commercial Property Insurance Claims

Insurance is well known for its claim denial, and of course, you don’t want to add to the figures. So, keep these firmly in mind when dealing with possibly denied claims:

• Understand Your Policy Properly – Read the terms carefully before you sign. Know what’s covered, what’s excluded, and any conditions you need to meet (such as regular maintenance or specific security measures).
• Keep Comprehensive Records – In the event of a claim, evidence is crucial. Maintain up-to-date records of receipts, contracts, photos of the property’s condition, and a log of any maintenance or repairs carried out.
• Act Fast & Get Professional Help – If a claim is denied, consult your broker, insurer, or a solicitor specialising in property disputes as quickly as possible. They can review the rejection, negotiate with the insurer, and, if necessary, pursue legal action on your behalf.
  
  

Being prepared and proactive significantly improves your chances of resolving disputes quickly and successfully.

Reducing Commercial Property Insurance Costs

Commercial property insurance is a must-have, but that doesn’t mean you should be overpaying. There are plenty of practical ways to bring premiums down without sacrificing the cover you need:

• Boost Security – Simple upgrades like strong locks, alarm systems, and CCTV not only reduce the risk of theft or vandalism but can also make insurers more willing to lower your premiums.
• Stay on Top of Maintenance – A well-kept building is far less likely to suffer from leaks, electrical problems, or structural damage. Fewer issues mean fewer claims, and often lower costs.
• Shop Around and Review Regularly – Don’t just accept the first renewal price. Compare quotes from different providers and check your cover each year to make sure you’re still getting the best value.
• Bundle Policies Where Possible – If you need multiple types of cover (like building, contents, and liability), combining them with one insurer can often save you money and make things easier to manage.
  
  

By taking steps like these, both landlords and tenants can keep their properties protected while keeping insurance costs under control.

Looking for your next commercial space to rent or tenant-ready property to buy? At PropList, we make it simple to find tenant-ready properties across the UK, with the clarity you need to plan ahead for costs like insurance. Start your search today and secure a property that works for your business and your bottom line.