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Commercial Property Insurance: Frequently Asked Questions

 

Question: How long does it take to get a quote?
Answer: Unlike auto insurance, each building is different so there is no standard of risk. Therefore, each commercial property submission is reviewed independently and rated individually. Typically, steps include property inspection, applications, submissions to markets, review of building history, and release of the quote.

 

Question: Does my building need to maintain Property Coverage?
Answer: Yes. All Lenders require property insurance (sometimes called “hazard insurance”) to protect their collateral.  Even if your property is debt-free, it is a wise decision to obtain insurance to protect your equity. Most people will find they don’t have the financial wherewithal to rebuild should their building be destroyed or heavily damaged.  Insurance allows security should a catastrophe hit.

 

Question: My building had no claims, why did my premium increase this year?
Answer: Unfortunately, claims are just one factor considered by a carrier to determine a building’s premium. Claims paid out on an entire class of business can have an effect as well.

Another factor not often considered is the Stock Market.  Insurance premiums are invested by the insurance company during the policy term, and the returns on those investments are used to help keep the premiums low. If those returns are poor are less than expected, it may cause the rates to change.

 

Question: How do I keep my premiums as low as possible?
Answer: Most importantly, be sure your buildings show “pride of ownership.”  Prevent claims and be proactive. Inspect the premises for trip-and-fall hazards and eliminate them. Replace worn components to prevent a future claim. Keep the building well-maintained. Also, accepting a higher deductible amount will lower the premium.

Question:  Will the policy pay for the entire damage, even if it is higher then the limits on the policy?
Answer:  Not typically. Most carriers will only pay up to the loss limit of the policy after the deductible. This is why it is imperative to have the correct limits and be insured for the full replacement cost of the property.

 

Question: How do I know if I am insured to the full replacement cost?
Answer: Insurance brokers and carriers are not appraisers, nor do they warrant the adequacy of coverage. The only way to make absolutely sure you are insured for the correct amount is to have an independent appraisal firm out to the association.

 

Question: I paid $1,000,000 for my building, but according to the insurance policy, the limit of insurance is only $525,000. What gives?
Answer: Market value is not the same as replacement cost. When re-building a building, there is no consideration taken for land value.

 

Question: Why is my carrier non-admitted? Are they disreputable?
Answer: Many times a broker just cannot place coverage with an admitted carrier, and must look to non-admitted carriers as replacements. Non-admitted carriers are just as reputable as admitted carriers, having to pass similar rigorous rules and regulations within the state they are admitted in (a non-admitted carrier may not be admitted in California, but is typically admitted in another state).

 


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