MIXED-USE PROPERTY CASE STUDY
Salon With Three Apartments Above, Declined for Its Residential Share, Inner Melbourne
A three-level building with a heritage-classified frontage, a prior roof claim, and a residential share that six insurers said was too high. Two markets quoted. Placed for building and liability at around $10,800.
THE SITUATION
The owners of a three-level building in inner Melbourne came to us at renewal. They had decided to leave their incumbent insurer and wanted competing terms for building and public liability cover.
The building had a hair salon at street level, taking a little over half the floor space, and three residential apartments above. There was a terrace on top and a car stacker below with two spaces. The walls were cladding and render. The street frontage carried a heritage classification, and a builder had done works to it that later had to be regularised. Rental income across the four tenancies was around $140,000 a year and the rebuild sum insured was $3.6 million.
There was a prior claim. The street had flooded, the roof and terrace membrane had failed, and while the insurer at the time paid around $5,000, the owners had spent more than $30,000 of their own money on the roof, the membrane, the flooring and the walls to fix the cause properly.
OUR APPROACH
Before approaching any market we measured the residential share the three ways an insurer might: by floor space the building was just over half commercial; by tenancy count it was three-quarters residential. We knew which insurers would decline on which measure, so we didn't send it to the ones that count tenancies.
Our approach focused on:
- The claim as a repair story: the $30,000 the owners spent above the claim payment was evidence of a building that had been fixed, not a building that leaks, and we presented it that way
- The heritage frontage on its own terms: a classified frontage isn't the same as a heritage-listed building, and the submission drew that line clearly
- Building and liability together: the owners wanted both, so we sought combined terms rather than a property-only quote that would have left liability to be placed separately
The owners had their own questions along the way: whether the car stacker was included, whether the $3.6 million was a rebuild figure rather than a market value, and how relocation costs during repairs would be treated. Each was worked through with the underwriter before binding, which is the kind of detail a portal quote never surfaces.
THE CHALLENGES
Six insurers declined. Several said it in almost the same words: the residential share was above half, or the residential tenancies made up more than half the tenants by number, and the building was outside their appetite. The rest declined on the residential exposure in one form or another.
None of that described the building. It described each insurer's cut-off. The same building at a market with a higher residential threshold is an ordinary mixed-use risk with a well-documented claim and a strong repair history.
THE OUTCOME
Two specialist markets quoted. One offered property-only cover at around $14,900. The other offered building and public liability together at approximately $10,800, on wording that suited a mostly residential building, and that's where we placed it.
The owners moved from an insurer they had decided to leave to combined building and liability cover with a specialist underwriter, sixteen days after the first call, after six insurers had declined on the residential share.
If you've been told the residential part of your building is too big, read when most of the building is residential: it explains the three ways the share is measured and where the cut-offs sit. The wider picture is on our mixed-use property insurance page.
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Send us the floor areas and the tenancy count. We calculate the share every way an insurer might and take the building to the market whose rule it clears.