Looking and thinking about ways to reduce the cost of your commercial property insurance?
As you know, no building is 100% immune from hazards, either natural or man-made. That's why all business owners operating out of a brick-and-mortar facility can benefit from insurance that covers their building in the event of:
storms, earthquakes, floods
water damage from burst pipes
The more perils you include, the more you'll pay for coverage.
The same goes for the specific items your policy will include. Typically, commercial property insurance coverage may extend to all of the following:
furniture, fixtures, equipment
The more items you cover, the higher your premiums.
This may lead you to wonder what else affects your coverage costs? Step into an underwriter's shoes and consider all the risk factors present on your property. Next, think of ways you can change or adjust these to reduce the threats your building is facing.
Let's start with age. Older buildings tend to suffer from various age-related flaws, which can reduce their capacity to weather fires, water damage, and natural disasters.
Further, older plumbing and electrical systems can lead to fires and floods, while outdated structural design can weaken the building's seismic resistance. For these reasons, owners of older buildings typically pay more significant premiums than those who own or operate new buildings. That said, there are several upgrades you can perform to help lower the cost of your insurance coverage.
replacement of Mechanical, Electrical, and Plumbing (MEP systems) with newer, code-compliant variants
replacement of roofing system
Chances are, these upgrades will also increase your property's resale value and make it safer.
Location, location, location. The location of a building can be a source of various hazards. Consider the obvious examples of a floodplain lot or a building situated in a fire hazard zone – it's only natural for an insurer to deem such properties a risk. On the other hand, proximity to emergency services means faster response times, less damage, and thus the likelihood of lower rebuilding costs.
While you may not be able to move your business, there are things you can do to safeguard your building against location-specific hazards. For example, performing a soft-story retrofit will improve your building’s seismic soundness. Likewise, ember-resistant screens, foundation vents and sump pumps may offer enhanced protection against wildfires and floods, respectively.
Do you know what causes the most water damage in buildings? Bad plumbing. Burst pipes are an insured peril, and underwriters pay close attention to the state of your plumbing system when calculating the cost of coverage. Premiums for buildings with outdated plumbing, or with a history of water-related problems are likely to be higher than those of newer buildings. Upgrade your plumbing, and you may qualify for a discount from your insurer.
Another thing that causes leaks: bad roofs. Another key way to prevent moisture damage; a building's roof deteriorates over time, and older roofs are prone to more leaks. An insurance policy covering water damage will cost more if the insured building's roof is outdated or in a poor state of repair. Replacing your roofing membrane can help you qualify for lower premiums, prevent leaks, improve your building's energy efficiency, and increase its resale value.
Next? Fire Safety. A building's exposure to fire hazards is a critical cost-determiner. The factors below affect a building's ability to avoid fires and/or withstand them without grave damage:
Type of construction. Structures containing combustible materials such as wood present a considerable fire risk in the eyes of an insurance company. Such structures are unlikely to benefit from any premium reductions, unlike those built with concrete or steel. While you cannot change what an existing building is made of, you may be able to earn a discount by investing in robust fire safety measures.
Type of electrical system. Obsolete and/or outdated electrical systems are another major fire hazard to which insurers don't take kindly (neither do building departments). Making sure that your electrical wiring is code-compliant will leave your underwriter with one less risk to consider.
Occupancy. Certain occupancies are considered higher-risk than others. For example, leasing space to an auto repair shop or a dry cleaning business may lead to costlier insurance coverage for the entire building.
Fire protection systems. These systems play a critical role in alerting the occupants about a fire, dispatching emergency crews promptly, preventing flame spread and aiding firefighting efforts. These systems include fire alarms, sprinklers, fire hose cabinets, and nearby hydrants. A lack of adequate fire protection is likely to raise the cost of your property's insurance coverage.
Not all hazards are natural. Is your building secure? Because most property insurance policies cover theft and vandalism, a well-planned crime prevention strategy could be reflected in lower premiums. Fences, window grates, access control systems, closed-circuit television and security alarms are excellent crime prevention strategies, which will not go unnoticed by your underwriter.
Finally, consider the Replacement Costs. This is what it would cost to replace or rebuild your building, or parts of it, in the event of damage or destruction. Your insurance provider will present several coverage options; the less you insure, the lower your premiums will be. Note that covering replacement costs is not the same as covering the actual cash value; the latter is the sum of money needed to replace a damaged item at the fair market value, less depreciation, and typically commands higher premiums.
How Design Everest can help
Whether you want to lower the cost of your insurance coverage, increase resale value, or enhance safety, our engineers can help. We offer a full suite of structural, civil, and MEP engineering services, including:
*Note: The content published above was made in collaboration with members of Design Everest.
You must have an account to comment on the post. Register with us if you are an AEC professional!