Volume 7,March 2016

Owner Outlook: Factors That Will Increase Your Investment Real Estate Insurance, continued

Understanding key differences can make insurance premiums a lot easier to navigate. Here are four factors that can have a serious impact on your insurance costs.

1. HIGH RISK TENANTS 

The type of tenant you have in your commercial property could affect the cost of your own insurance.  How the premises are used will affect the property insurance rate. For instance, a restaurant carries a higher risk than other types of businesses would. As a result, it costs more to insure a restaurant.  A few other types of tenants that carry a higher risk and will increase your premiums are Subsidized/Section 8, laundromats and auto repair shops, daycare facilities, and pet care facilities.

2. LOCATION, LOCATION, LOCATION 

Properties located in high-crime areas will usually incur higher insurance premiums. Another factor to consider is whether your property is located in an urban area where there is easy access to a fire station or fire hydrant, which serves to lower your rates. By comparison, if your property is located further away from a fire station or fire hydrant, it might cost more to insure. Surrounding neighbors can also impact the cost of insuring your building if there’s going to be a greater risk that your building could be collateral damage in the event of an accident at a neighboring business.

3. LAPSE IN COVERAGE 

A lapse of coverage for even a day or two could spell trouble later on. This is because liability insurance claims are based on the date they occurred, not when they’re reported or filed as a lawsuit. Late payment of an insurance premium equals a period of lapsed coverage and also means you’ll be viewed as a higher risk and your insurance rates will rise accordingly.

4. INCREASED COST OF CLEANUP 

Insurers often use an industry calculator such as Marshall & Swift to calculate the cost of rebuilding a property, including the cost to clean up after a catastrophe. It may be tempting to underinsure your property for cheaper premiums, but think twice before taking that risk, as it could bite you later if a claim is made. 

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