Business
What is commercial combined insurance and which businesses use it?
Commercial combined insurance bundles property, liability and business interruption cover into one policy. See what it covers and which firms use it.
Commercial combined insurance is one business policy that bundles several covers together, usually property damage, business interruption, employers' liability and public or products liability. It is mostly used by businesses that own or rent premises and hold stock, machinery or tools, such as manufacturers, wholesalers, warehouses, workshops and some shops.
Instead of buying a buildings policy from one place, liability from another and loss of income cover from a third, you get one schedule, one insurer and one renewal date. Each part of the package still works as its own section, with its own limit, excess and exclusions.
What does commercial combined insurance cover?
There is no single legal definition, so what is inside the package varies from one policy to the next. The Association of British Insurers groups business cover into types such as liability, commercial property and business interruption, and a commercial combined policy pulls several of these together. The sections you will usually see are:
| Section | What it is for | Is it compulsory? |
|---|---|---|
| Buildings | Damage to premises you own or are responsible for under a lease | No, though a lender or landlord may require it |
| Contents and stock | Machinery, equipment, fixtures and the goods you hold | No |
| Business interruption | Lost income and extra costs after an insured event stops you trading normally | No |
| Employers' liability | Claims from staff injured or made ill through their work | Yes, for most employers |
| Public and products liability | Claims from customers, visitors or the public for injury or property damage, including from products you make or supply | No |
| Optional extras | For example goods in transit, money, glass, or equipment breakdown | No |
The ABI's guide for small businesses looks at gaps in SME cover. Research carried out for the ABI by Public First found that of the respondents with physical premises, 23% had business interruption insurance.
Because the package is built around physical premises and property, it is often described as property-led. If your business is mainly advice, design or software, the bigger risks may sit elsewhere (professional indemnity or cyber, for instance), and these are often sold separately.
Which businesses use commercial combined insurance?
It tends to be used by businesses where a fire, flood or break-in at the premises would hurt in two ways at once: the physical damage, and the weeks of lost trading that follow. That usually means a mix of premises, valuable stock or plant, and employees. Common examples include:
- Manufacturers and engineering firms, with machinery, raw materials and finished goods on site, plus products liability for what leaves the factory.
- Wholesalers and distributors, where stock values can be high and goods in transit cover may be added.
- Warehousing and storage businesses, which may hold their own goods and other people's.
- Workshops and light industrial units, such as joiners, fabricators and vehicle repairers.
- Larger shops and trade counters, where stock, the shopfront and customer footfall all bring risk.
A sole trader working from home or from a van usually has less to insure at a fixed site. They may find standalone cover, such as public liability plus tools, fits more closely. If liability limits are your main question, our guide on how much public liability cover tradespeople need goes through the usual £2 million to £10 million range.
Vehicles are normally insured separately as well. Business vans and lorries sit on a motor or fleet policy, which is covered in how many vehicles you need for fleet insurance.
Is any part of it a legal requirement?
The package as a whole is not compulsory. Employers' liability, which most commercial combined policies include, usually is.
GOV.UK's employers' liability page sets out the rules:
- You need it as soon as you become an employer.
- The cover must be at least £5 million and must come from an authorised insurer. You can check an insurer on the Financial Conduct Authority register.
- You can be fined £2,500 for every day you are not properly insured.
- Your certificate must be available to employees, for example at the workplace or on an intranet, and you can be fined £1,000 if you do not show it to an inspector who asks.
There are narrow exceptions. GOV.UK lists them as only employing a close family member (such as a spouse, civil partner, parent, child or sibling) or only employing someone based outside England, Scotland and Wales. If you think an exception applies to you, check the full wording on GOV.UK before relying on it.
Buildings cover is not required by law, but a mortgage lender or a commercial lease will often require it, so check your loan terms and lease.
Commercial combined or separate policies: what is the difference?
Both routes can insure the same risks. The difference is how the cover is arranged.
| Commercial combined | Separate policies | |
|---|---|---|
| Paperwork | One schedule and one renewal date | Several schedules and renewal dates |
| Gaps and overlaps | One insurer looks at the whole business | Easier to miss a gap between policies, or pay twice for the same thing |
| Flexibility | Sections can be added or removed, within what the insurer offers | Each policy can come from a different insurer |
| Claims | One insurer handles a claim that touches several sections, such as fire damage plus lost income | A single event may mean claims on two or more policies |
Neither is automatically better. It comes down to what your business owns, what it does and how many separate risks you would otherwise be juggling.
What should you check before buying?
A package is only as good as the figures and terms inside each section. Before you compare commercial combined insurance quotes, it helps to have these ready and to read each quote against them:
- Rebuild cost of the building. This is the cost to rebuild, not the market value. Professional valuations are commonly used to work this out.
- Full replacement value of contents and stock. Allow for seasonal peaks, as stock levels can swing through the year.
- The business interruption figure and indemnity period. The indemnity period is how long the policy will pay for lost income after an insured event. Think about how long it would realistically take to rebuild, refit and win customers back.
- Liability limits. Employers' liability must be at least £5 million. Customers, landlords or contracts may ask for a set public liability limit.
- Excess on each section. These can differ between property and liability sections.
- Insured perils and exclusions. Check whether flood, storm, theft and accidental damage are included, and any security conditions such as alarms or locks.
Why underinsurance matters
The ABI describes being underinsured as having cover, but for less than the level of protection you need. Research carried out for it by Public First also found that about half of respondents had reviewed their insurance types or cover levels in the past year.
Many commercial property sections contain an "average" clause. For example, if stock really worth £100,000 is insured for £50,000, a £20,000 claim could be cut by half to £10,000, because the stock was only insured for half its value. Check your policy wording to see whether average applies and how.
Flood cover for business premises
Flood Re, the scheme that helps make flood cover available for homes, does not accept commercial or business properties. If your premises are in a flood-risk area, check the property section of any quote carefully, as flood may carry a higher excess or be excluded.
What is the duty of fair presentation?
Business insurance runs on different disclosure rules from personal insurance. Under section 3 of the Insurance Act 2015, a business must give the insurer a "fair presentation of the risk" before the contract starts. That means:
- disclosing every material circumstance you know or ought to know (or at least enough to prompt the insurer to ask more),
- presenting it in a way that is reasonably clear and accessible, and
- making sure statements of fact are substantially correct.
If you fall short, section 8 and Schedule 1 set out what the insurer can do. If the breach was deliberate or reckless, it can avoid the policy, refuse all claims and keep the premium. If it was not, the outcome depends on what the insurer would have done had it known. It can avoid the policy and refund the premium if it would not have offered cover at all, treat the policy as if it had different terms, or reduce a claim in proportion if it would have charged more. For example, if you paid £1,000 but the insurer would have charged £2,000, a claim could be paid at half its value.
In practice, tell the insurer or broker about things like changes to what you make or store, new premises, past claims and anything unusual about the building. If something changes during the year, let them know.
What if a claim is refused?
Start with the insurer's own complaints process. If that does not resolve it, smaller businesses can go to the Financial Ombudsman Service. For events from 1 April 2019, a small business qualifies if its annual turnover is under £6.5 million and it has either fewer than 50 employees or a balance sheet total under £5 million. Size is measured at the point you complained to the insurer.
Kompare is not an insurer and does not give advice. It passes your details to specialist UK brokers, who can talk you through which sections fit your business and send you prices.