Pennsylvania Commercial Property Insurance
Buildings, Computers, files, furniture, product inventory and future business income are key components of your business and you can protect against the devastating effects of their loss with a properly designed Commercial Property Insurance policy.
Insurance in general is often not very straight forward. These policies really need to be specifically set up and endorsed to properly cover your individual needs. Many insurance agents have a false sense of security when they use a Business Owners Policy to insure your business. Yes the business owners policy has many extra incidental coverage built into the policy language it also has some standard language that actually might leave you with less coverage than you thought you have.
Most all commercial policies have some sort of a Coinsurance requirement that says you are agreeing that the building limit on the policy equals at least, most typically 80% (this can be 90% or 100%), of the full replacement cost just prior to the loss. If that limit is less than the required amount some sort of penalty will be applied to your loss payment and you will receive an amount less than the cost to repair or replace the damaged building!
With most Commercial Package Policies (CPP's) this coinsurance is usually listed on the declaration page somewhere close to the building limit. However, if you are insuring the building on a Business Owners Policy, the insurance to value requirement is buried in the policy language and not at all apparent until its too late. As a building owner you have learned that the cost of Business Property Insurance is directly related to the limit of insurance on the building and so most building owners tend to want to insure at lower limits to save money. This brings us to the issue of building Valuation.
Valuation - One Of The Most Common Topics Of Conversation
There are several valuation companies doing building valuations and the top 3 in this area are ISO, MSB and E2value. The insurance company wants to offer a low rate for the person who keeps a well cared for property and insures the building to a value high enough to cover all their costs after a total loss. So there are two opposing factors, the first is the property owners awareness of market value and perhaps competitive bidding values both of which don't apply to insurance loss situations. Yes following a major loss you may get bids from different contractors to do the work, however, if they are a good contractor they already have work lined up for the next 3-9 months.
If they take on your job they either have to put off other work, hire additional employees or pay overtime. They will only do this if they are going to make more money on your job than their normal competitive bid jobs they already have lined up. The other item increasing your replacement cost is that of debris removal. The Pennsylvania Rental Property Insurance policy says that additional coverage for debris removal is included in the building limit. So, if you have that major loss and you have to clean up the site before you start to rebuild that cost is to be included in your building limit.
The building limit typically needs to be higher than you think it does, but I also see times when the Replacement Cost estimate is inflated by using a higher construction quality than the buildings actual construction warrants. So, the big catch to the building valuation issue is when you have a partial loss. The insurance company investigates the loss and has a building replacement cost valuation done, using one of the companies listed above and their report suggests a building limit that often seems high. Now they look at what limit you were actually carrying and determine if penalties are to apply.
Tenant Occupied Commercial Buildings
Many of the property owners and managers that I have conversations with are primarily interested in price when it comes to shopping for Commercial Property Insurance. And I have to agree that COST not price is one of the most important factors when considering a new protection plan for your properties. Sometimes when you buy on price you pay more when you have losses that aren't fully insured.
So, pricing should be second to having the proper coverage because once a loss occurs, and losses will occur sooner or later, it will be too late. Unfortunately for those that pursue price alone everything seems great until one of those losses occur and the policy you purchased doesn't respond the way you expected it would.
Tenant Liability Issues
One major area that many of you are missing when it comes to your Commercial Building Insurance program is the liability of your tenants. What??? Yes that is correct, many of you are absorbing the cost of your tenants liability in your insurance policy!!! The large property owners understand this and that is why they all require their tenants to carry liability insurance and they check it on a regular basis. Why is this such a big deal you ask? 20-25% of the losses that you occur are the result your tenants liability. If you are requiring that your tenants have insurance, and you stay on top of it your insurance costs will go down! Some of my companies are offering immediate discounts if you are using a 3rd party insurance tracking service, and over time your rates will go down and likely stay down.
In some cases this will even keep your policy from being cancelled. Here are actual claims that I have seen on Business Property Insurance policies that I wrote; Tenant isn't using the service of a professional duct/filter cleaning business and causes fire while cooking, tenant's employee causes fire from smoking (dumping ashes into a trash can or in a planter starting plant & building on fire), tenant's employee is operating a forklift and backs into a support pole causing a roofing collapse.
I can perform the tenant tracking for you at a very reasonable price. Just ask me about that service.
Are You Doing A Great Job Maintaining Your Properties?
A well maintained Tenant occupied Commercial Building has many advantages. Some of these are:
- Tenants are happier and less likely to treat the property poorly, less likely to sue you, they will bother you less.
- Tenant turnover is much lower.
- The quality of the tenant you attract is much higher.
- Lower likelihood of trip and falls
- Lower likelihood of property losses
- Insurance companies will give you lower insurance pricing.
- Occupancy rates are higher.
- Rents are higher.
- And more than I can mention here!
Having a well maintained building really is a win win scenario!
Business Property Insurance Doesn't Have To Be Expensive
I have direct appointments with multiple insurance companies that want to specifically insure tenant occupied commercial buildings. This allows me to compare pricing with multiple insurance companies and find you the best pricing available for your property. Give me a call today to see how I can improve your current asset protection program. I look forward to working with you.
Definitive Insurance Solutions works with clients in Lancaster, York, Harrisburg, Mount Joy, Elizabethtown, Manheim, Lititz and all over Pennsylvania.
Here are two reasons to get started right now!
- First, this is already on you mind so why spend time rethinking about this later.
- Second, we will help you secure a policy that will reduce your likelihood of having an uncovered claim.
I look forward to hearing from you!
Joe Hershey, CPCU, CIC