Most commercial insurance policies that cover business buildings will have some form of index-linking built in at renewal. What this means is that each year a certain percentage is applied to your sum insured to increase this to ensure that, over time, inflation does not erode the suitability of the sum insured.

With commercial property insurance you, the policyholder, must ensure that the amount that the building is insured for is adequate. For example, if a building costs £500,000 to purchase, the rebuilding cost could be less or more depending on the age of the building, the construction materials and where it is. In certain parts of the country, even after the recession, up to 40% of the purchase cost of some buildings refers just to the value of the land (with permission for residential/commercial use) it sits on.

If you insure for the incorrect amount (too low) then your claim payments could be reduced, although you do get a 10-20% margin of error with most insurers. If you have had a commercial building insurance policy that fell due for renewal recently, you may have found that the sum insured has not been index-linked. This is a consequence of the price crash over the past 18-24 months. Rebuilding costs always lag behind and insurers have, for a few months, not increased sums insured. This is likely to change very shortly and sums insured will increase again.

What you do need to do is to review your sum insured every year. Forget about the figures on your insurance schedule and work out yourself what the rebuilding cost is likely to be.  A really basic rule of thumb for standard construction, post 1900, commercial premises is £100 per square foot. If your sum insured is less than this amount, you should speak to your broker to get this changed. The caveat is, that this is no more than a guide and you should always consult a professional surveyor or valuer if you want to ascertain the correct rebuilding cost.

In 2010, we are finally seeing, what Norman Lamont would describe as, the green shoots of recovery.

Time is a great healer, rather than government intervention. One area of the market that is starting to pick up is property. Not in a huge way, but bit by bit. We have seen in, January and February 2010 more commercial building insurance enquiries, for new purchase property, than we saw in the last third of 2009. Spring is traditionally the time for home sales, whereas commercial used to be steady throughout the year.

If you are buying a commercial property, then you are either doing this to rent out, to develop or to occupy yourself. If you are looking to rent, you need to ensure that you not only cover the structure itself, but that you have loss of rental income cover.

This does not mean cover if the tenant defaults, what it covers is if there is a fire, or a flood and your tenant moves out, you receive the equivalent rent from the commercial insurance company until such time as it is let again.

Make no mistake though, in the event of a serious fire your building could take years to get rebuild. Modern industrial units are quicker, due to the natue of materials. Whereas, older established buildings, such as hotels or restaurants will need time.

So, you need to make sure that not only do you have the correct building sum insured, but that you have an adequate loss of rent. As an absolute minimum, you will need 12 months, for many properties though, 18, 24 or 36 months would be more suitable.