For commercial property owners, investors, or managers – property insurance and risk management is a major expense. Working in this sphere over the past several years, we’ve been able to develop a sense for primary insurance concerns:
- Wind/Hail coverage – As an agent operating primarily in the DFW area, wind/hail coverage is always going to be a big issue. One significant development over recent years is a ‘deductible buydown’ policy. Essentially, in addition to your commercial property policy, you can purchase a separate policy that reduces the deductible to a smaller amount.
- Insurance requirements for lenders – Some niche insurers are good at anticipating lender requirements…such as flood insurance, earthquake insurance, business income / extra expense, boiler/machinery ins, general liability, umbrella liability, and others. When those niche insurance programs are not available, these coverages can be obtained through specialty markets.
- Replacement Cost vs ACV – Replacement cost estimates a property value according to the approximate cost of rebuilding the structure with similar materials. ACV (Actual Cash Value) is simply the replacement cost minus depreciation. How does this apply to your policy? ACV valuation estimates a lesser value, typically costs less premium, but provides inferior coverage.
- Co-Insurance – Watch out for ‘Co-Insurance’ on your declarations page. Here’s an example – The insured has 80% co-insurance and his building is valued at $1,000,000. If he insures his building for $700,000 ($100k less than 80%) and has a loss, he will be penalized for being underinsured. Bottom line – Make sure you have sufficient values on your policy.
- Affordable rates – Rates are always fluctuating with the insurance markets. So, regarding ‘affordable rates’, how can an agent help? It’s important that your agent 1) has a strong knowledge of the property insurance marketplace [major players, which markets are performing well] and 2) strong relationships with those markets [If the carrier doesn’t trust the agent, they won’t offer favorable pricing/coverages].