Any experienced building owner can tell you rates for commercial insurance can fluctuate from property to property. But, why? What are some of the major factors that can influence those rates?
Beware! The tenant that occupies the leased space can have a profound effect not only on the rates, but also whether or not the insurance companies will be willing to entertain insuring it at all. Who occupies a tenant space is important to the insurance company because the risk of a loss created by a tenant’s operation varies.
Take for instance a wood-working shop; to an insurance company, the concern for the building would be an elevated potential for fire exposure. Over time, even with precautions put in place, there could be large amounts of saw dust not only on the floor but in the air that can be extremely combustible. With this type of exposure, the list of insurance carriers interested in writing a policy for this building owner will be limited. Also, you can bet the rate for the building will likely be higher than that of a building that houses a law office for instance.
Other insurance cost-drivers to keep in mind are building updates. Not all commercial buildings are newly constructed and many may be a little long in the tooth. For insurance, carriers need to feel comfortable that the owners of these older buildings have kept up with a few key updates. The updates they are mostly concerned with are the following: 1) the roof; 2) heating and/or air conditioning; 3) plumbing; and 4) electrical.
If you think about it, these four areas, if not maintained and updated as needed/required, can really cause some major problems if they fail. Let’s say your building was built in 1975 and has never had its roof replaced. The age of that roof makes it more susceptible to wind damage as compared to a roof that is 5 years old or newer. And since most policies cover for the peril of wind, it makes sense that the insurance company will want to insure roof coverings that are in good shape. A building owner may find that their older roof may not qualify for wind coverage at all, or may be subject to a substantially higher wind/hail deductible.
A similar case can be made for the plumbing systems of buildings. An insurance company will not be fond of writing a building that is plumbed with polybutylene (a known defective material) pipes and a 20 year-old water heater as compared to a building plumbed with copper supply lines and a new water heater.
These are just a few things that can really change your rates and deductibles for your policy and should be kept in mind. So, next time you purchase a new commercial property to rent be sure you pull permits for updates and know what businesses if any (will) occupy the space.
Call Heacock Insurance for your Commercial or Business Insurance.
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