Why Accurate Commercial Property Insurance Coverage Is More Important Than Ever (2025)

If you own or lease a commercial property in the UK, there’s one thing you can’t afford to overlook right now: the accuracy of your commercial property insurance coverage. It's a global 'perfect storm' as the property market shifts, rebuild costs rise, and extreme weather events become more frequent, ensuring your insurance policy accurately covers your rebuild cost has never been more critical. Yet, thousands of businesses are unknowingly underinsured, exposing themselves to potentially enormous financial risk.

In this blog, we’ll explain why accurate commercial property insurance coverage is more important than ever, and why getting a professional rebuild cost survey is the smartest decision you can make in 2025.

What Is Commercial Property Insurance Coverage?

Commercial property insurance coverage protects your business premises and physical assets from risks such as fire, flood, storm damage, vandalism, or accidental damage. It’s a financial safety net designed to help you recover and rebuild in the unfortunate case where disaster strikes.

But here’s the catch: if your building is underinsured, your insurer could only pay a percentage of the claim. This is due to something called the "average clause," which we'll cover in more detail below.

Commercial Property Insurance - Average Clause

The average clause is a condition included in some commercial property insurance policies that effectively penalises underinsurance. If your property is insured for less than its actual rebuild cost, any claim you make may be reduced in proportion to the level of underinsurance.

For example, if your building should be insured for £1,000,000 but is only insured for £700,000, you’re underinsured by 30%. In the event of a claim, your insurer may reduce the payout proportionally (by 30%), and only pay 70% of the loss. This can lead to serious financial shortfalls, leaving you responsible for covering the rest of the damage out of your own pocket.

Why Is Accurate Commercial Property Insurance Coverage So Critical in 2025?

1. Rising Rebuild Costs

The cost of labour and materials has risen across the UK. Steel, timber, bricks, and even insulation materials have seen price increases over the last few years. Add to this a skilled labour shortage, and the total cost to rebuild a commercial property today is likely far more than it was just a few years ago.

If your insurance coverage is based on outdated figures, you could be significantly underinsured without even realising it.

2. More Frequent and Severe Weather Events

Storms, floods, and fires are happening more frequently. Commercial properties are increasingly at risk of damage, particularly older/Listed buildings or those in high-risk areas.

3. The Underinsurance Crisis

A recent industry study from Gallagher Insurance revealed that up to 46% of UK commercial properties could be underinsured. This may be due to a number of factors; rising labour and material costs, relying on index linked premiums year on year or using outdated estimates.

Unfortunately, if a claim is made and it turns out the rebuild value is inaccurate, the insurer can reduce the payout proportionally, leaving the owner to cover the financial shortfall.

4. Refurbishments and Renovations Often Missed

Improved or extended your premises in the last few years? Improvements such as the addition of a new kitchen, outdoor area, or upgraded interior fixtures. Many business owners forget to update their policies after such renovations – meaning the new added value isn’t reflected in their coverage and therefore, they're now underinsured.

How Underinsurance Can Hurt Your Business

An unfortunate real world example of how underinsurance can have detrimental consequences, is The Clockwork Inn in Dorset (close to home for us). In 2015, the Inn suffered from a devastating fire thought to be started from the thatched roof, which almost completely destroyed the building. The insurer said they would only cover £300,000 of the estimated £520,000 rebuild cost. Leaving the owners to cover the remaining £220,000 shortfall.

The owners managed to cover £150,000 from a loan, and raised £70,000 from an incredible community fundraise which meant the pub re opened a year later. However, due to heavily increased insurance premiums as a result of the fire, the owners had to close the pub in the coming years.

A Reliable Solution: Professional Rebuild Cost Survey

One of the most effective ways to reduce the risk of being over or underinsured is to have an accurate rebuild cost survey carried out. Unlike a market valuation, which estimates how much your property might sell for, a rebuild cost survey calculates the actual cost of reinstating the property from the ground up in the event of a total loss. This includes demolition, materials, labour, professional fees, site access challenges, and more.

This is where we come in. At Don’t Guess, we specialise in delivering accurate, RICS-compliant rebuild cost surveys for commercial property owners throughout the UK. Every assessment is handled by a qualified RICS-accredited surveyor, ensuring a high standard of accuracy and professionalism. Our desktop surveys are a faster, straightforward, and more cost-effective solution compared to typical site surveys.

You can learn more about our survey options here.

Final Thoughts: Don’t Wait Until It’s Too Late

Too many property or business owners unfortunately only find out they were underinsured when it’s already too late. Insurance is meant to protect your business in the worst-case scenario. With rising costs and increased risk, now is the time to make sure your commercial property insurance accurately covers you.

If you have concerns over the accuracy of your policy, think you might be at risk or you've never had a professional survey carried out; you can take our free underinsurance risk check. It's designed by our surveyors to give you an idea if you may fit into a higher risk category for underinsurance. It takes no more than 5 minutes and there's no obligation to do anything else afterwards.

Start with our free underinsurance risk quiz or speak to our team today.

*Please note: we are not financial advisers or insurance advisers, so this is not financial advise and is solely for information purposes.