When it comes to property investment choices, most will think of the familiar choice of residential property.  However many are recognising that commercial property investment is a viable and profitable investment solution. There is potential in this area for more stable and greater returns than what residential property can provide. However there are also very specific areas of risks which can be overlooked by those investors operating in this market.  Here we discuss why commercial property investment works and some of the important elements of commercial property insurance so that you can be best protected.

Why commercial property?

There are numerous benefits of purchasing and leasing out a commercial property as opposed to a residential property.  The first is relative to the lease period for a commercial property. This is generally a fixed period, much longer in duration than a residential lease.  Where typically residential rentals lease for 6 months to one year, a commercial property is leased in agreement for 3, 5, or 10 years.  This added length of lease time adds stability to the investment.

The maintenance of a commercial property is also covered by the lessee. For example council rates, or repairs are commonly paid for by the tenant. Making the net rental income higher than that of a residential property where these are paid for by the owner and deducted from rental income.  The quality of tenant is generally of a higher quality when it comes to commercial property than with a residential rental property.

While a commercial property vacancy can on average take a longer time to fill than a residential property, the higher risk associated with commercial property comes with a higher return on the investment when it is occupied. Smart investors are those who can match supply with the right rental product at the right time.

Commercial property insurance – Anticipate the risks

When it comes to commercial property insurance for your investment you will need advice to source an insurance policy to protect your exposure as landlord against the main areas of potential financial loss.  These include:

  • Loss and/or damage to the building itself including – improvements, fences, signage, outdoor property not attached to the building
  • The building contents including – furniture, supplies computers, records and documents, stock, personal property, plant and machinery
  • Loss of income as a result of major damage to the property, leading to a break of the lease ( property uninhabitable )


The property should also be insured against loss and/or damages due to:


  • Fire
  • Weather damage such as storms, winds, hail, lightning strikes
  • Vandalism, burglary and crime
  • Accidental damage, and
  • Floods, earthquakes or other natural disaster event


It is imperative you receive the right advice on these policy sections from your broker because there is no ‘standard’ commercial insurance policy – each policy needs to be custom designed to suit the needs and risks of that location and owner.  The insurance costs are generally passed on to the lessee as per the tenant agreement contract.  Every property is unique and will have its own unique set of insurance risks associated with it.  If you require assistance with your commercial property insurance contact Challenge Insurance Services today and we will be more than happy to help.