The Ultimate Guide to Commercial Property Insurance Terminology (UK)

Introduction

Commercial property insurance can feel like its own language. Policies are full of terms that sound similar but mean very different things, and small wording differences can decide whether a claim is paid.

This guide breaks down the most common commercial property insurance terminology you’ll see in UK policies and broker conversations. It’s written for landlords, owner-occupiers, property investors, facilities managers, and SME directors who want to understand what they’re buying.

Core policy concepts

Insured

The person or business named on the policy schedule. Only the insured (and sometimes other named parties) can usually claim.

Insurer

The insurance company underwriting the risk and paying valid claims.

Broker

An intermediary who arranges cover and helps you place the risk with an insurer. Brokers also help with mid-term changes and claims support.

Policy schedule

A summary document showing key details: insured name, property address, covers selected, sums insured, excess, limits, and policy period.

Statement of fact / proposal

The information you provide to obtain cover. It’s used by the insurer to assess risk and set terms.

Duty of fair presentation

Under the Insurance Act 2015 (for most commercial policies), you must disclose every material circumstance you know (or ought to know), or give sufficient information to put the insurer on notice to ask questions.

Material fact

A fact that would influence an insurer’s judgement on whether to insure you and on what terms (price, excess, conditions).

Non-disclosure / misrepresentation

Failing to disclose a material fact or providing inaccurate information. This can reduce a claim payment or invalidate cover depending on the circumstances.

Policy period

The start and end dates of cover (typically 12 months).

Renewal

The process of continuing cover for a new policy period. It’s a key time to update insurers on changes (tenancy, works, security, occupancy).

Mid-term adjustment (MTA)

A change to the policy during the policy period, such as adding a new property, changing sums insured, or updating occupancy.

Property and occupancy terms

Premises

The insured location(s) shown on the schedule.

Building

The structure itself, including permanent fixtures and fittings. Policies vary on what’s included, so always check definitions.

Contents

Items not permanently fixed: furniture, office equipment, stock, tools, and sometimes tenant’s improvements.

Landlord’s fixtures and fittings

Items provided by the landlord that are part of the building or used to service it (for example, fixed flooring, fitted kitchens in some cases, boilers, fixed lighting).

Tenant’s improvements

Alterations or additions made by a tenant (partitioning, counters, signage). These may need to be insured by the tenant or the landlord depending on the lease.

Owner-occupied

The insured business operates from the premises.

Tenanted / let

The premises is occupied by a tenant. Insurers often want details of tenant type, lease terms, and any hazardous activities.

Unoccupied / vacant

Often means no one is living or working there for a defined period (commonly 30 days, but it varies). Unoccupancy can trigger conditions (draining down, inspections, security) and restricted cover.

Part-occupied

Only part of the premises is in use. Insurers may treat this similarly to unoccupied depending on the layout and risk.

Change of use

A shift in how the property is used (for example, office to light industrial). This can materially change risk and must be disclosed.

Trade / business description

The type of activity carried out at the premises. This affects fire risk, theft risk, and liability exposures.

Sums insured, values, and limits

Sum insured

The maximum amount the insurer will pay for a covered loss for that section (subject to policy terms). It should reflect the correct value basis (often reinstatement for buildings).

Declared value

A value you declare at inception (commonly for buildings). It may be used in average calculations.

Limit of indemnity

The maximum payable for a particular cover (often used for liability covers, but also appears in property extensions).

Reinstatement value

The cost to rebuild the property as new, including materials, labour, professional fees, and debris removal (where covered). It is not the market value.

Market value

What the property could sell for. This is usually not the right basis for buildings insurance.

Indemnity basis

Settlement based on the value immediately before the loss, allowing for wear and tear. More common for older items or where “new for old” isn’t provided.

New for old

Settlement that replaces items with new equivalents without deduction for wear and tear (subject to policy terms).

Day one uplift

An extra percentage added to the sum insured to allow for inflation between valuation dates and the time of loss.

Index linking

Automatic adjustment of sums insured during the policy period in line with an index (often building cost indices).

Underinsurance

When the sum insured is too low. Underinsurance can reduce claim payments due to average.

Average (underinsurance condition)

A clause that reduces claim payments proportionally if you are underinsured. Example: if you insure for 50% of the correct value, the insurer may pay only 50% of the loss.

Excess

The amount you pay towards a claim. It can be fixed (e.g., £500) or time-based for business interruption.

Inner limit

A smaller limit within a larger sum insured for specific items (e.g., “theft of stock: £25,000 any one loss”).

Common perils and what they mean

Fire

Damage caused by fire. Policies may also cover smoke damage.

Lightning

Damage caused by lightning strikes. Sometimes included under “fire and lightning”.

Explosion

Often refers to explosions of boilers, gas, or other insured equipment (definitions vary).

Storm

Typically strong winds and weather events. Insurers may define storm by wind speed or include “storm or flood” together.

Flood

Water escaping from a natural source (river, sea, heavy rainfall) causing inundation. Surface water flooding is increasingly relevant.

Escape of water

Water leaking from fixed water or heating systems (pipes, tanks). Often excludes gradual leakage.

Impact

Damage from vehicles or animals impacting the building.

Malicious damage

Deliberate damage by third parties. Cover may be restricted for unoccupied properties.

Theft

Taking property without permission. Policies often require forcible and violent entry/exit for theft claims.

Attempted theft

Damage caused during an attempted theft, even if nothing is stolen.

Subsidence

Downward movement of the ground supporting the building.

Heave

Upward movement of the ground, often due to clay soils expanding.

Landslip

Sideways movement of the ground.

Ground movement

A broader term that may include subsidence, heave, and landslip.

Accidental damage

Sudden, unforeseen physical damage (e.g., putting a foot through a ceiling). Often optional and can be limited by conditions.

Glass cover

Cover for breakage of fixed glass (windows, doors) and sometimes signage.

Riot and civil commotion

Damage caused by disorder and disturbance. Definitions matter, especially for larger events.

Key cover sections in commercial property policies

Buildings insurance

Covers the structure and permanent fixtures. Check what’s included: outbuildings, garages, boundary walls, gates, car parks, and underground services.

Contents insurance

Covers business contents, landlord’s contents, or tenant’s contents depending on who is insured.

Stock

Goods held for sale or used in production. Stock values can fluctuate, so insurers often ask for peak stock levels.

Business interruption (BI)

Covers loss of gross profit or revenue following insured damage that interrupts trading.

Gross profit

In BI terms, this is usually turnover minus uninsured working expenses (not the same as accounting gross profit). Always check the policy definition.

Indemnity period

The maximum period the insurer will pay BI losses after damage (e.g., 12, 24, or 36 months). Too short is a common gap.

Increased cost of working (ICOW)

Extra costs you spend to keep trading after a loss (temporary premises, overtime, outsourcing), where those costs reduce the BI loss.

Alternative accommodation / loss of rent

For landlords, BI may be structured as loss of rent and may include additional costs like letting agent fees.

Property owners’ liability

Covers legal liability as a property owner (e.g., injury to visitors, damage to third-party property).

Employers’ liability

Required by law for most employers. Covers injury/illness claims from employees.

Public liability

Covers injury or property damage claims from third parties arising from your business activities.

Claims and settlement terms

Claim

A request for payment under the policy after a loss.

Notification

Telling the insurer/broker about an incident that may give rise to a claim. Many policies require prompt notification.

Claims-made vs occurrence

Property damage covers are usually “occurrence” based (the loss happens during the policy period). Some liability covers are “claims-made” (the claim is made during the policy period). It’s worth understanding the difference across your whole insurance programme.

Loss adjuster

A professional appointed by the insurer to investigate and assess the claim.

Reserve

The insurer’s estimated cost of the claim set aside internally.

Salvage

Recoverable value from damaged property (e.g., sale of scrap). Salvage can affect settlement.

Contribution

Where more than one policy covers the same loss, insurers may share the cost.

Subrogation

The insurer’s right to recover costs from a responsible third party after paying your claim.

Betterment

Improvements made during repair that leave you better off than before the loss. Some policies may reduce settlement for betterment.

Wear and tear

Gradual deterioration, typically excluded.

Gradual damage

Damage that occurs over time (slow leaks, rot). Often excluded unless sudden and accidental.

Conditions, endorsements, and exclusions

Condition

A requirement you must follow (e.g., maintaining alarms, locking windows). Breaching a condition can affect claims.

Condition precedent

A stricter condition that must be complied with for cover to apply.

Warranty

A promise about risk controls (e.g., “alarm must be set when premises are closed”). Warranties can be strict, so check wording.

Endorsement

A change to standard policy wording, either adding cover, restricting cover, or clarifying terms.

Exclusion

A situation or type of loss the policy does not cover.

Reasonable precautions

A common condition requiring you to take reasonable steps to prevent loss.

Security requirements

Specific requirements such as locks, shutters, alarm type, CCTV, or keyholding arrangements.

Hot works

Work involving heat (welding, cutting, roofing torches). Policies may require a hot works permit system.

Working at height

A risk area that may affect underwriting and conditions, especially for property maintenance.

Risk information insurers commonly ask for

Construction type

Brick, stone, concrete, steel frame, timber frame, cladding type, and roof construction. Some materials can increase fire spread risk.

Roof type

Flat roof, pitched, felt, asphalt, metal, or composite panels. Flat roofs can affect escape of water and storm risk.

Year built

Older buildings can have different wiring, plumbing, and structural risks.

Listed building

A building protected for its historic value. Reinstatement can be more complex and expensive.

Sprinklers

Automatic fire suppression systems. Insurers may ask if they are installed and maintained.

Fire alarm type

Manual, automatic detection, monitored systems, and maintenance arrangements.

Intruder alarm

Alarm grade, signalling type, and whether it’s monitored.

CCTV

Coverage, recording, and monitoring arrangements.

Physical security

Locks, shutters, bars, gates, perimeter fencing, and lighting.

Occupancy and tenancy details

Who occupies the building, what they do, and whether there are any high-risk tenants.

Claims history

Past losses and incidents. Insurers use this to price and set terms.

Lease and contract terminology (landlords and tenants)

Full repairing and insuring (FRI) lease

A lease where the tenant is responsible for repairs and the cost of insurance (often via service charge), while the landlord arranges the policy.

Service charge

Charges paid by tenants to cover shared costs such as insurance, maintenance, and management.

Tenant’s liability

Responsibilities the tenant has under the lease, which may include insuring certain improvements or contents.

Sum insured apportionment

How the landlord’s building sum insured is allocated across units for service charge purposes.

Interested party

A party with a financial interest in the property (e.g., mortgage lender) noted on the policy.

Loss payee

A party to whom claim payments may be made (often a lender).

Specialist extensions you may see

Trace and access

Cover for the cost of locating the source of a leak and making good after accessing walls/floors.

Debris removal

Costs to remove debris after a loss. Often included but may have limits.

Professional fees

Architects, surveyors, and engineers’ fees required to reinstate after damage.

Alternative premises

Costs to rent temporary premises after insured damage.

Loss of metered water

Cover for unexpectedly high water bills due to an insured escape of water.

Terrorism

Often excluded from standard policies and offered separately via Pool Re in the UK.

Engineering inspection

Some policies include inspection requirements for lifts, pressure vessels, and other equipment.

Quick glossary (A–Z style)

• Average: Proportional reduction of a claim due to underinsurance.

• BI (Business Interruption): Cover for loss of income/gross profit after insured damage.

• Condition precedent: A condition that must be met for cover to apply.

• Declared value: Value stated to the insurer, often used for average.

• Endorsement: A change to policy wording.

• Excess: The amount you pay towards a claim.

• FRI lease: Tenant responsible for repairs and insurance cost (landlord arranges cover).

• Indemnity period: Maximum period BI will pay after damage.

• Inner limit: A smaller limit within a section.

• Material fact: Information that affects underwriting decisions.

• Reinstatement value: Cost to rebuild as new (not market value).

• Subrogation: Insurer’s right to recover from a third party.

• Sum insured: Maximum payable for a section.

• Underinsurance: Sum insured too low, triggering average.

• Unoccupied: Not in use for a defined period, often triggering conditions.

Common misunderstandings (and how to avoid them)

“Market value is what I should insure for”

Buildings insurance is usually based on reinstatement cost, not sale price. A rebuild can cost more than the property is worth on the open market.

“I’ve got buildings cover, so I’m fine”

If you rely on rental income or your premises to trade, consider business interruption and loss of rent. Also check property owners’ liability.

“Unoccupied just means no one lives there”

Commercial wording can be strict. If a unit is empty, closed, or only visited occasionally, you may need to tell your broker and follow unoccupancy conditions.

“Accidental damage covers everything”

Accidental damage is helpful, but it still has exclusions (wear and tear, poor maintenance, gradual leaks, defective workmanship).

Practical checklist before you buy or renew

• Confirm the reinstatement value (ideally via a professional valuation)

• Check sum insured and whether day one uplift or index linking applies

• Review unoccupancy definitions and conditions

• Confirm indemnity period for BI/loss of rent

• Check security requirements and any warranties

• Make sure tenant activities match what the insurer has on file

• Understand your excesses (including flood and escape of water)

• Keep records: photos, inventories, maintenance logs, alarm servicing

Call to action

If you’d like a quick review of your current commercial property insurance wording, sums insured, and unoccupancy conditions, we can help you spot common gaps and make sure the cover matches how the building is actually used.

Call 0330 127 2333 or request a quote via https://www.insure24.co.uk/