Thanks to shutdowns induced by the on-going pandemic situation, thousands of businesses across Australia have been sitting in limbo. When your business or building is unoccupied for an extended period of time there are a number of liabilities and risks that you will need to address.
You may think because there is no daily activity on your premise that less insurance is needed. However, an extended unoccupancy could serve to increase your exposure to risk and financial loss, as well as reduce the real estate value of your building. This is why it’s a good idea to reevaluate your current insurance products. Here’s how to get started.
“Unoccupied” and “vacant” are not the same thing
A property is considered unoccupied if it is empty of only the people. Vacancy refers to premises which are also bare of personal property, equipment, etc. McKenzie Ross Insurance Brokers can assist you with defining these and how each will impact your insurance coverage and premiums.
Every policy is different and commercial insurance policies will typically cover you for around 30 to 90 days after your business premises becomes unoccupied. It’s crucial that you update your insurance broker as soon as you know about the unoccupancy period.
We can assist you to analyse and better understand your insurance policy’s wording so that you can take the best possible next steps should the unoccupancy period continue. You may be required to pay a higher excess on claims. Due to your risk changing, it’s also possible that your insurance policy could be cancelled if the unoccupancy or vacancy lasts longer than the period stated in your policy’s wording.
Maintaining your protection
Business premises that are noticeably empty can be magnets for burglary or vandalism.
It can be expensive when you need to cover damage and loss from your own pocket. It’s recommended that you invest in a monitored alarm system or security measure that will protect your business during periods of unoccupancy. You should also ensure that security personnel and another person or two are aware of the unoccupancy so that they can respond when you are not available.
The building may be unoccupied, but it’s still humming
Your building’s heating, ventilation and air conditioning (HVAC) and other systems may still need to be run even though there is nobody there. Risks can arise from these systems lying dormant, such as an increased risk of Legionella if cooling towers and condenser water systems are switched off, says the Australian Institute of Refrigeration, Air Conditioning and Heating. Much of your building will also still require regular maintenance. Make sure you check your obligations with experts and legal advisors before you turn off any of these systems for shutdowns.
Make sure you have the insurance you need in case your operations come to a halt
According to CIO of Avari Capital, Alan Liao, when business premises become unoccupied the real estate value of the property can shrink by up to 40%. However, replacement insurance value is often unaffected and it’s essential that business owners discuss reducing their coverage with their broker/advisor before doing so as it could potentially leave them underinsured.
Covering unoccupied premises can be challenging in general, however you may be able to take out cover three, six or 12 months. This will protect your liability as well as cover your building and contents. Standard insurance typically covers for fire, lightning, earthquake and aerial damage, but you could also choose to extend that to other risks such as malicious and storm damage.
The team at McKenzie Ross can help advise you about acquiring or adjusting insurance for unoccupied business premises, as well as make flexible recommendations for when your operations return to normal. Get in touch with us today – Call us on (03) 9691 2222 or request a quote
Australian Tax Office
Australian Institute of Refrigeration, Air Conditioning and Heating