Commercial property insurance is not a single lump sum, but a structure built up by asset group: the building, the machinery and equipment, and the stock each get their own sum insured and, in part, their own rules. Anyone who understands these three already understands the heart of the policy.
- Building: the structure and its built-in elements – at reinstatement value, not market price.
- Machinery and equipment: the production and office equipment fleet – based on an inventory and value list.
- Stock: raw materials, work in progress, finished goods – with fluctuating value, hence its own rules.
Building: the frame the company lives in
Building cover protects the structure, the finishes, the built-in building services, and the associated structures – the sum insured for the latter needs to be given separately. The sum insured is typically based on the reinstatement cost, not the market price and not the book value; a policy written at actual (depreciated) value also exists. That difference translates into hard cash at claim time: the details are set out in the article on determining the building's value.
On leased property, the building is typically covered under the landlord's policy – on the company's side, the question then becomes cover for tenant improvements (alterations, built-in fit-out).
Machinery and equipment: the engine of operations
This covers everything the company works with: production machinery, workshop equipment, office technology, furniture. Good cover starts with a list: what you have, what it would cost new today, and what the operation cannot run without. The premises inventory template and the machinery inventory article offer a fillable aid for this.
Separate modules exist for key items of machinery – machinery breakdown, electronic equipment – covered by the machinery breakdown and electronic equipment articles.
Stock: the value that moves
Stock is a different animal from the building or machinery: its value can change from week to week. With seasonal stocking-up, the warehouse's value can grow many times over – if the policy doesn't track this, underinsurance strikes at exactly the worst moment. Solution patterns – stating an average stock value, limits, periodic increases – vary by insurer and can typically be combined; details in the article on fluctuating stock value.
For stock, the storage method can also be a condition: pallet height, dunnage, the placement of water-sensitive goods – it's worth comparing the condition against actual warehouse practice.
Why is it worth thinking group by group?
Because losses also arrive group by group: a storm breaches the building, a power surge takes out machinery, a leak soaks the stock. If all three sums insured are correct individually, the policy has your back from every direction. The article on the annual review covers this yearly upkeep.
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