Most property owners understand that they need property coverage to indemnify them if they have a loss. Now if Three Little Pigs actually blow down your building, that is not going to be a covered peril, so you are out of luck but knowing what is covered and what might be is so important. As a property owner, this will help so you know if your coverage is complete or has gaps that could cost you big.
Let’s start at the beginning. You will need to know the construction of your building. The most common construction for commercial buildings is Masonry Non-combustible. This means the building has masonry load bearing walls and unprotected steel roof supports, generally brick or concrete. These equal to noncombustible or slow burning floors and roofs which mean to you that your construction style allows for a higher probability that you will not suffer a total loss in the event of a fire.
Covered causes of loss…so I already mentioned pigs’ heavy breathing is not covered. What is covered is natural wind, and fire of course, along with other covered causes of loss as long as a direct physical loss to your property occurs at the described premises, you can file a claim. There are three types of causes of loss forms, know which one you have and the options of the others. (Side note, all property policies are different, so although this is a standard ISO statement, it might not be true to your particular policy).
The most critical component of commercial property coverage is in its valuation. Working with a Commercial Insurance Coverage Specialist will help insure that you are getting the appropriate valuation for your property, because if you do not, co insurance penalties are no laughing matter. Valuation should be based on property replacement cost, which is an added endorsement. Otherwise you are dealing with actual cash value which takes depreciation into account.
How is the replacement cost determined? I am always hearing my clients tell me, “I can only get $500,000 for my building if I sell it, what do you mean I need to insure it for $1.2 million dollars!” Replacement cost is determined by the cost incurred today to rebuild your property to new (indemnify) if you experience a loss. Depending on age, construction, size and a host of other factors, a skilled agent will calculate using cost estimator tools what your replacement cost figure should be. From there, you and your agent have a variety of options to add or delete coverage’s to meet your specific insurance needs.
This is a pretty basic overview of commercial property; so much goes into insuring a commercial property correctly. Future blogs will consist of insuring multiple properties on a blanket property form, protection class, types of sprinkler systems and an overview of how commercial property is rated.
If you would like to hear about a specific topic, let me know!