Commercial building insurance

Most commercial policies carry a co-insurance clause, also called an average clause. Your home policy may have forgiven a low sum insured; this clause often will not. It tests your sum insured against at least 80 per cent of the real rebuild cost, and the figure in your own policy is the one that counts. The test is taken at the start of your policy year.

• On a partial loss, fall below that line and the insurer scales your claim down in proportion to the shortfall.
• On a total loss, the claim is not simply capped at the sum insured: on at least seven of the nine wordings we place, the insurer pays up to 120 per cent of the sum insured per event, subject to the policy's settlement terms. If the real rebuilding cost is above that, the difference is yours to fund.

Going direct does not avoid it. The direct business packs we have read that insure buildings carry an 80 per cent clause too.

Two real claims. In a 2025 storm claim CIB handled, a regional NSW landlord had insured a retail building for $500,000 against the roughly $1.99 million we advised in writing. He could not accept that a rebuild would cost much more than the building's market value. We found two wording points that brought the tested value down to about $1,308,000, and the clause still cut his partial-loss payout to about 48 cents in the dollar (The Co-Insurance Clause: What Every Building Owner Must Know). An owner at Virginia, on Brisbane's north side, accepted a 40 per cent higher sum insured after our valuation. Within three months, in February 2022, the building flooded and the insurer paid about $745,000 with no underinsurance cut (commercial building insurance in Brisbane). That is one claim on one building, not a promise that a valuation prevents a reduction.

The way out. Insure to the full cost of rebuilding today, including demolition, debris removal, fees, code upgrades and inflation, not the market value or what you paid. We commission the valuation for our purposes as your broker, to inform the advice we give you, and again at every renewal. On several of the wordings we place, insuring at the full valuation figure takes the underinsurance penalty off your policy. That is what the wording says, not a claims outcome. See Desktop Building Replacement Valuation.

For a first read now, check your underinsurance risk in two minutes.

1. It starts with you. What is driving the call, and what keeps you up at night about this building.
2. Two questions you will be asked. Why did you buy insurance in the first place? The answer is always the same: to replace what you have. So why has the building never been valued? That is usually where the conversation turns.
3. Then the number. We commission the desktop building replacement valuation, and you send us nothing. In business hours, the rebuild figure is usually back within 1 to 2 hours of the call.
4. Then the prices. If your sum insured is close to that figure, we quote straight away. If there is a real gap, we ring you back to go over it and give you prices at more than one sum insured. Sometimes a higher excess is what makes full cover affordable.
5. The decision is yours. Nothing is agreed, signed or paid until you tell us to go ahead.

We read the nine business pack wordings we place most often side by side in September 2026. Three things in them catch owners out.

• Flood is not automatic. Of those nine, two include flood as standard and six cover it only if it was added and shows on your schedule. One offers no way to add it in the wording. None prints a separate flood sub-limit. Check your schedule rather than assume.
• Storm damage to fences and signs is capped. On all nine, storm damage to gates, fences, signs and retaining walls is capped at $25,000 in total for one event. Only one lets your schedule raise it. The building's own sum insured does not change that. On the nine, fabric awnings and shade cloth sit inside the same cap. We had a claim for an awning over an outdoor dining area, destroyed in a wind storm, that cost about $40,000 to repair. Whether a claim like that is capped turns on the awning and the wording you hold, so check both before the storm.
• A slow leak is not a burst pipe. A sudden burst is not excluded on any of the nine. A leak that has dripped for months usually is not paid: all nine exclude seepage, rust and mould. Gradual causes are excluded too, on one wording unless you can show you could not have known.

In north Queensland, the Cyclone Reinsurance Pool and local flood detail are on our Cairns and Townsville pages.

Your contents and stock, your income if the building cannot be used, lost rent and your liability as the owner are separate covers, mapped on Commercial Property Insurance. Who pays the premium when the building is leased is a lease question, answered in who pays for building insurance on a commercial property.

Your roof. After roof damage, the insurer's first question is whether the roof was already failing. So at quote time we review aerial imagery of your roof and tell you its condition. We also run more than 1,200 aerial roof condition checks a year, using Nearmap imagery. See Roof Condition Monitoring.

Anyone who owns a commercial building, from offices and shops to warehouses, factories and medical centres, whether you lease it out, run your business from it, or both. Start from where you sit: landlords and Commercial Landlords Insurance, owner-occupiers, mixed-use owners, or lot owners in a commercial strata scheme, where the body corporate insures common property. The ownership questions are in full on For Commercial Property Owners. A substantial share of the buildings we insure are in New South Wales, placed exactly as in Queensland against up to nine insurers, with a representative in Sydney. If it is your own home, that is Home and Contents Insurance instead.

1. Using an online calculator instead of a desktop building replacement valuation. It can still fail the 80 per cent test, and it will not satisfy the valuation escape.
2. Not declaring a renovation, an extension or a new kind of tenant. That undeclared change is what a declined claim gets pinned on. An older building can also cost more to rebuild to current codes than its age suggests.