Why Mixed-Use Buildings Are Harder to Insure (And How to Get Cover)

Key Takeaways:

• Most mainstream insurers won’t cover mixed-use buildings because they don’t fit neatly into residential or commercial categories
• The type of commercial tenant (cafe, yoga studio, office) directly affects how hard the building is to insure and what you’ll pay
• In 2026, wellness and fitness tenancies are being treated as higher risk by some insurers following targeted arson incidents in NSW
• Specialist brokers with access to underwriting agencies and ISR markets can typically find cover even after multiple declines
• Tank Insurance has placed mixed-use building insurance for 50+ properties across Australia, including buildings declined by 11 insurers

Your building has a shop on the ground floor and flats upstairs. Sounds straightforward enough. But when it comes to mixed-use building insurance, most mainstream insurers don’t see it that way.

They see a property that doesn’t fit their residential box or their commercial box. And instead of working out which box it belongs in, they just decline it.

If you’ve been knocked back trying to insure a mixed-use property, you’re not imagining things. It’s one of the most common placement challenges we deal with at Tank Insurance. Here’s why it happens, what it actually costs, and how to get cover sorted.

Why Do Mainstream Insurers Decline Mixed-Use Buildings?

Mainstream insurers decline mixed-use buildings because their underwriting systems are built around two categories: residential and commercial. A building that’s both creates a risk profile that doesn’t fit standard assessment models.

Think about it from the insurer’s perspective. A residential insurer prices for things like storm damage, theft, and water leaks. A commercial insurer prices for public liability exposure, business interruption, and tenant activities. A mixed-use building needs both - and most insurer systems can’t handle that overlap.

Here are the main reasons we see declines:

1. Dual occupancy classification - The building sits between two underwriting teams and neither wants to own it
2. Commercial tenant risk - The type of business operating downstairs changes the whole risk profile
3. Building age - Heritage or pre-war construction combined with commercial use is a red flag for many insurers
4. Fire separation concerns - Older buildings often lack modern fire separation between commercial and residential sections
5. Sum insured complexity - Valuing a building with mixed tenancies is harder than a straightforward residential block

At Tank Insurance, we’ve placed mixed-use property insurance for over 50 properties across Australia. Many of these came to us after being declined by anywhere from 3 to 11 mainstream insurers. It’s not that these buildings are uninsurable. It’s that they need to be placed through the right markets.

How Does the Tenant Mix Affect Your Insurance?

The type of commercial tenant in your building is the single biggest factor determining how hard it is to insure and what you’ll pay. Not all commercial tenants carry the same risk.

Here’s how insurers generally view different tenancy types:

Tenant Type	Insurer Risk View	Placement Difficulty
Professional office (accountant, lawyer)	Lower risk	Easier
Allied health (physio, dentist)	Lower-moderate risk	Moderate
Retail (clothing, gifts)	Moderate risk	Moderate
Beauty and wellness (yoga, pilates, salon)	Moderate-high risk (2026)	Harder than expected
Food retail (cafe, restaurant, takeaway)	High risk	Hard
Hospitality (bar, pub, nightclub)	Very high risk	Very hard

The fire exposure is what drives most of this. A cafe with commercial cooking equipment, gas connections, and extraction systems presents a fundamentally different risk to a professional office running laptops and a coffee machine.

The Wellness Tenancy Shift in 2026

Here’s something that’s caught a few property owners off guard this year. Yoga studios, pilates studios, and fitness tenancies used to sit comfortably in the lower-risk category. It appears that’s changed.

In early 2026, a wave of targeted arson attacks hit pilates studios and gyms across the NSW Central Coast and Newcastle. Multiple premises were firebombed within weeks of each other. The incidents made insurers nervous about the whole wellness and fitness tenant category.

We’ve seen firsthand how this plays out. One of our mixed-use property clients had their insurer non-renew specifically because they had a yoga studio tenant. The building was in Sydney’s Eastern Suburbs, nowhere near the Central Coast incidents, but from what we understand, the insurer pulled back from wellness tenancies across their book.

The only other quote that client could find was around $22,500. We placed cover at approximately $5,900 - a saving of around 74%. But it took going to specialist markets to get there.

Marel Pencev, Principal at Tank Insurance: “When it comes to mixed-use properties, as soon as residential makes up more than 49% of the building, your available market shrinks dramatically. Most residential insurers cap out at that threshold, and commercial insurers don’t want to price the residential component. That’s where specialist underwriting agencies and ISR markets become essential.”

What Does Mixed-Use Building Insurance Actually Cover?

Mixed-use building insurance is a property insurance policy designed to cover buildings that contain both residential and commercial tenancies under one roof. It protects the building structure, common areas, and provides liability cover for risks associated with multiple tenant types.

A comprehensive mixed-use property policy typically includes:

• Building cover - The physical structure, including walls, roof, floors, fixtures, and fittings. This covers damage from fire, storm, flood, impact, and other insured events
• Public liability - Protection if someone is injured in common areas or due to building defects. Usually $10 million or $20 million
• Loss of rent - If the building becomes uninhabitable after an insured event, this covers the rental income you’d lose while repairs are completed
• Glass cover - Replacement of plate glass shopfronts and windows. Particularly important for ground-floor retail tenancies
• Common area contents - Shared items like lifts, stairwell fittings, fire safety equipment, and any landlord-owned fixtures in commercial tenancies
• Machinery breakdown - Cover for lifts, HVAC systems, hot water units, and other building plant

Some policies also include flood cover, earthquake cover, and malicious damage as standard or optional extensions. The specifics depend on the insurer and the policy wording. The Insurance Council of Australia (ICA) provides general guidance on property insurance types, though mixed-use policies sit outside their standard consumer resources.

What About the Tenants’ Own Insurance?

Here’s the important distinction: your building insurance covers the structure and common areas. It doesn’t cover your tenants’ stock, equipment, or business contents.

Commercial tenants typically carry their own business insurance covering their contents, stock, and liability. Residential tenants may also want contents insurance for their belongings.

As the building owner, your mixed-use or commercial property policy covers the structure, common areas, and typically includes business interruption (loss of rent) and liability as part of the one programme. It’s not the same as a consumer landlord insurance product - it’s closer to a business pack. The tenants’ policies cover their own contents and business liability. They work together, but they’re not interchangeable.

What Are Shop-Top Buildings and Why Are They So Common?

A shop-top building is a specific type of mixed-use property with commercial tenancies (usually retail) on the ground floor and residential dwellings above. They’re one of the most common building types in older Australian suburbs and town centres.

Walk down any main street in inner Sydney, Melbourne, Brisbane, or regional town centres and you’ll see them everywhere. The corner shop with a flat above. The row of terrace shops with two storeys of apartments on top. The old pub with residential upstairs.

Shop-top buildings are harder to insure for the same reasons as other mixed-use properties, but they often come with additional complications:

• Heritage listing - Many shop-top buildings are pre-war construction, sometimes heritage-listed, which limits repair options and increases rebuild costs
• Non-standard construction - Older buildings may have timber framing, no fire separation between commercial and residential, and outdated electrical
• Strata vs non-strata - Some shop-top buildings are strata-titled (each unit separately owned) while others are single-ownership. The insurance approach is completely different. If yours is strata-titled, see our mixed-use strata insurance page instead

If your shop-top building is a single-ownership property (you own the whole thing), you need a mixed-use property insurance policy that covers the entire building under one programme.

How Do Specialist Brokers Place Cover for Mixed-Use Properties?

Specialist brokers place cover for mixed-use properties by accessing underwriting agencies and markets that mainstream insurers and comparison websites don’t offer. The process involves presenting the risk in a way that addresses each underwriter’s specific concerns.

Here’s how it works at Tank Insurance. We’ve placed cover for buildings with cafe tenancies, medical practices, yoga studios, boarding houses, retail shops, and everything in between. The approach changes depending on the risk, but the framework is consistent.

Step 1: Risk Segmentation

We break the building down into its component parts. Rather than presenting it as “a mixed-use building” (which triggers automatic declines), we detail each tenancy separately. What type of business? What fire safety measures are in place? What’s the residential-to-commercial ratio?

Step 2: Targeted Market Selection

Not every underwriter has appetite for every tenant type. A market that’s comfortable with professional offices might decline a building with a hospitality tenant. We match the specific risk profile to the underwriters most likely to quote.

Step 3: Submission Presentation

The quality of the submission matters. Where available, we include building valuations, fire safety compliance certificates, tenant details, claims history, and photographs. The more information an underwriter has upfront, the better the terms they can offer. For particularly high-risk properties where market appetite is limited, we sometimes recommend the owner invest in things like updated fire safety reports or building valuations to strengthen the submission and open up more options.

Step 4: Negotiation and Placement

Once we have terms, we negotiate on pricing, excesses, and any restrictive conditions. In hard-to-place cases, we might approach 10 or more markets to find the right fit.

We recently placed cover for a heritage building in Sydney’s Inner West with a cafe tenancy that had been declined by eight insurers. The premium came in at around $15,400 - roughly $30,000 less than the only other quote available. The difference came down to knowing which specialist market to approach and how to present the risk.

What Is ISR and Why Does It Matter for Mixed-Use Buildings?

ISR (Industrial Special Risks) is a type of commercial property insurance policy designed for complex or non-standard properties. It’s often the best fit for mixed-use buildings because it can accommodate the dual residential and commercial nature of the risk under a single policy.

Unlike standard residential or commercial policies that have rigid categories, ISR policies are designed to be flexible. They’re underwritten by specialist markets who assess each property individually rather than running it through automated systems.

For mixed-use buildings, ISR policies can:

• Cover both residential and commercial sections under one programme
• Include loss of rent, glass, and machinery breakdown in a single policy
• Accommodate unusual tenant types that standard policies exclude
• Handle heritage construction, non-standard materials, and older buildings

One thing to note: ISR is a property policy, so it doesn’t include public liability. You’ll need that arranged separately. A standard mixed-use or commercial property policy (more like a business pack) often bundles liability in, but ISR is specifically for the property and associated covers.

Most mixed-use properties we place end up on a commercial property or property owner business pack - that’s the standard approach. ISR comes into play for the higher-risk, higher-hazard buildings or properties with larger sums insured where standard commercial markets can’t accommodate the risk. When ISR is needed, the underwriters in that space understand the complexity and price it accordingly rather than applying blanket loadings.

One of our case studies involved a 1910s building in Inner Sydney with three different tenancy types including a boarding house. Eleven insurers declined. The ISR market was where we eventually found cover at around $7,000 annual premium.

What’s the Typical Cost of Mixed-Use Building Insurance in Australia?

Mixed-use building insurance premiums in Australia vary significantly depending on the building’s age, location, construction type, sum insured, tenant mix, and claims history. Based on the properties we’ve placed at Tank Insurance, typical premiums range from around $3,000 to $15,000+ annually.

Here’s a rough guide based on our recent placements:

Building Type	Typical Premium Range	Key Factors
Small dual-occupancy (1 commercial + 1 residential)	$3,000 - $6,000	Low-risk tenant, newer build
Shop-top terrace (retail + flats)	$4,000 - $8,000	Building age, tenant type
Multi-tenancy mixed-use (3+ tenancies)	$6,000 - $15,000+	Complexity, heritage, tenant risk
Heritage with hospitality tenant	$10,000 - $20,000+	Fire risk, heritage rebuild costs

These are ballpark figures from our portfolio. Your actual premium depends on your specific circumstances. But if you’ve been quoted significantly above these ranges (or can’t get a quote at all), it’s worth getting a second opinion from a specialist broker.

Frequently Asked Questions

Can I insure a mixed-use building through a comparison website?

Generally, no. Most comparison websites and direct insurers only handle straightforward residential or commercial properties. Mixed-use buildings almost always require a broker who can access specialist underwriting markets. That’s the whole reason the decline rate is so high - the standard channels simply aren’t built for this type of risk.

What if my building has been declined by multiple insurers?

Multiple declines don’t mean your building is uninsurable. It usually means it hasn’t been presented to the right market. At Tank Insurance, we regularly place cover for buildings that have been declined by 5, 8, even 11 insurers. The specialist ISR and underwriting agency markets have appetite for risks that mainstream insurers won’t touch. If you’re having trouble with a claim or dispute during this process, the Australian Financial Complaints Authority (AFCA) handles insurance-related complaints.

Do I need separate policies for the commercial and residential sections?

Not necessarily. A comprehensive mixed-use property insurance policy can cover both sections under one programme. This is often simpler and more cost-effective than trying to cobble together separate residential and commercial policies. ISR policies are particularly good at this.

How does building age affect my mixed-use insurance?

Older buildings (pre-1970s) are generally harder to insure because of non-standard construction, potential heritage restrictions, lack of fire separation, and higher rebuild costs. That said, we’ve placed cover for buildings dating back to the 1880s. Age alone isn’t a dealbreaker - it’s the combination of age plus tenant type that creates complexity.

What’s the difference between mixed-use property insurance and mixed-use strata insurance?

The key difference is ownership structure. Mixed-use property insurance covers a building under single ownership (one owner, multiple tenants). Mixed-use strata insurance covers a strata-titled building where individual units are separately owned by different people. If your building is strata-titled, you’ll need a commercial strata insurance policy instead.

Getting Your Mixed-Use Building Insured

If you own a mixed-use property and you’re struggling with declines, overpriced quotes, or non-renewals, the answer is almost always specialist market access. Standard insurers and comparison websites don’t have the products for this type of risk. A broker who understands mixed-use property insurance and has relationships with specialist underwriting agencies can usually find a solution.

Need help with your mixed-use building insurance? Tank Insurance specialises in hard-to-place property risks, including shop-top buildings, heritage mixed-use, and complex multi-tenancy properties. Reach out to our team at 02 9000 1155 or [email protected] to discuss your situation.

This is general information only and does not take into account your objectives, financial situation, or needs. You should consider the relevant Product Disclosure Statement (PDS) and seek independent advice before making any insurance decisions.