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Archive for the ‘commercial property insurance’ Category

Loss of rental income – what’s the indemnity period all about?

Friday, November 25th, 2011

On a commercial property owners insurance policy, the main cover taken out is for the actual building. This is the actual structure or the bricks and mortar. You cannot take out a policy without this. The cover you get is what they call “standard perils”, which is fire, storm, flood, burst pipes and a few others. This cover can be extended to include accidental damage and subsidence, heave and landslip. We always quote to include these covers as a minimum.

In addition you can get property owners liability and glass cover. The reason being that insurers always cover the glass separately. Then you can get loss of rental income. If you own the building and rent it out, if there is a fire (for example) and your tenant moves out, you lose out on your rent. This is where you get loss of rental income, but only from an insured peril. What this means is, if a tenant defaults on their rent, you are not covered, but if it is unable to be let for 9 or 10 months while work is done, you get the rent.

The question is, how long do you take the rent cover for? This is what the indemnity period is. All standard policies, that have loss of rent, will have the cover for 12 months. What you need to do though is consider what would happen, in the event of a disastrous fire? Could your whole property be rebuilt to a standard so it could be let again within 12 months? The chances are, no, and this is why you may need to speak to your business insurance broker about getting cover for an extended period. It really adds very little to the premium to go from 12 to 36 months. You can get cover for 18, 24 and even 48 months from most insurers. This is, again, where the beauty of dealing with a broker shines through.

There are plenty of websites that offer, and we use the term as loosely as possible, to compare business insurance. If you do not tick the box to add loss of rent, there is no-one there to question this and explain the benefits of this cover.

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Commercial Property Owners – information required

Thursday, July 21st, 2011

If you are looking for a commercial property owners insurance quote, there are three main ways to go about this.

Firstly, you can phone an online provider, whether this be a broker or a commercial insurer direct.

Secondly, you can visit one of the many websites that state they will compare costs for you.

Thirdly, you can visit your local broker and obtain a quotation face to face.

In addition to these three, there are many different smaller methods such as your bank or mortgage company providing you with a quote.

Whichever of the options that you choose to follow, there will be a differing set of questions asked of you. The reason for this is that ultimately it will be a business insurance company that will provide you with the quote. The different companies all want slightly differing information, depending on their underwriting and risk acceptance criteria.

The main question though, for commercial, industrial or business building insurance is the rebuilding cost. This is the amount of money it would cost, at the inception or start of the policy, to rebuild the property in the event of a catastrophic loss. This is the type of loss, such as fire, where the whole building needs to be reconstructed. This cost, which will ultimately be your sum insured, if you take out a policy. Needs to include the following:-

1) The cost of clearing the site, including demolition of any remaining structure.

2) The cost of rebuilidng any underground, or below ground, foundations. These are normally not destroyed in a fire, but will need replacing.

3) All architects, surveyors, legal, regulatory and professional fees in rebuilding.

This is where you need to make sure that the cost is sufficient. It is not correct to base the rebuilding cost purely on the purchase price or the market value.

The best way is to get a professional valuation, by an approved building valuation surveyor. Althought there is a cost involved, at least you have a yardstick to base your policy on. If there are any problems regarding the sum insured, you will then have comeback on the surveyor.

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Flat roofs – the information the commercial insurance companies want to know.

Thursday, July 7th, 2011

As part of our business insurance broking role, we have to go through a fact finding process. This usually takes the form of a conversation with a customer. We do not like to use pre-printed forms because one minute you could be speaking to a publican, the next an aerobics instructor and after that a UK citizen, living in Australia, trying to sort out cover on the propery that they let out in the UK (and yes, these are real and we managed to get all three quotes converted to policies).

Speaking to the last customer, the property owner, I asked what materials the roof was constructed of. To which he replied, I do not know I have never been in the roof. We did manage to ascertain though that it was a pitched, slate roof. This is what the insurers like, pitched roofs are of course designed to make water drip off, rather than go through and slates, like tiles, have a very long life span, if installed and maintained correctly.

But, when a customer says that they have a flat roof, we have to go into a different mode of questioning, which is why we need the questions in our heads, rather than on the paper, otherwise we would need a very big piece of paper. But what exactly do the insurers need to know and why? For commercial property owners insurance, one of the bigger causes of loss is water ingress from storm. If a roof is manufactrued of anything that is not as substantial as slate, tiles or metal then there is more chance of water getting in and causing damage.

Insurers will need to kow the exact material, the age, when it was last replaced (most felt roofs only last 10-15 years) and whether it is maintained either annully or bi-annually. Insurers then use this information to decide whether to load the premium and/or apply additional terms.

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Commercial property insurance – indicative rates

Thursday, May 26th, 2011

When looking for physical products, such as cars, houses, consumer electronics and clothing, to name but a few, you will always have a rough idea of what is reasonable and what is expensive. You are therefore able to understand what is and what is not a bargain, based on your past experience.

If you are looking for commercial property insurance, for the first time, how do you know what is a good, expensive or cheap price? In addition, if it is cheap, compared to others, then how do you know it is going to give you what you want in terms of cover?

Unlike your house, when you get cover for a commercial building, this is based on three things (in the main), the cost to rebuild the property, where it is and how it is occupied. There are of course other factors, such as construction, cover required, your claims experience and many more which affect the price charged, but the main three account for at least 60-70% of the premium cost.

So how do you know what is reasonable or not? The first thing you really need to nail down is the cost to rebuild, don’t guess the figure as this could cause problems later. Refer to either the company that have financed the mortgage (if applicable) or speak to a local surveyor. Make sure you approach three or four surveyors, you would be surprised at the difference in cost for what is essentially a simple measuring (of the floor area) exercise. Surveyors are having a tough time as well, you should be able to get a re-instatement only report for a few hundred pounds.

Once you have this figure, you then need to apply a percentage rate to the total figure. Any business insurance broker worth their salt should be able to give you a rough idea. For better risks (as far as insurers are concerned) such as shops, offices and salons, the rate will be around 0.20%. This will increase, depending on the factors mentioned above. For a fish and chip shop (higher fire risk) the rate could be up to 0.40%. Speak to a broker to get an idea, you can then at least compare this to your existing deal.

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Commercial building insurance – is the market turning

Sunday, April 3rd, 2011

Every commercial insurance company in the UK has their own “preferred” types of business that they want to underwrite. Some will balk at the higher risks (such as oil rigs, airports etc) whereas others specialise in this area. It is a case of, whatever floats your boat.

If the insurers know, from experience, that they can make money from a particular type of risk (say, fish and chip shops) then they will do three things. Firstly, they will design specific products to suit the industry. Secondly, they will market these products and thirdly, they will price accordingly.

I have done a few different marketing exams in the past as part of my professional qualifications. You can tell that they are not written by people in the real world, because they say that targeting niche areas is the key. This is absolute tosh. In 2011, there is very little marketing that anyone can do, that cannot be immediately replicated by A N Other.

This is where commercial property insurance comes into play. You cannot get yourself a niche product, because everyone wants a piece of the action. All insurers want commercial property business, because, over the years it makes them money. There is enough of it about that they can get in some significant premiums to cover the losses. As a result, they price to get the business, which means cheap.

Over the past few years though, they have been going beyond the profitability line. We have seen two harsh winters, this means lots of burst pipes, collapsed gutters and other cold induced damage to property. So they are not making as much as they thought, and are losing out. How do they rectify this? By increasing prices. If you find that you have a commercial or business property insurance renewal that has gone up a bit too much, give us a call to see what we can do for you.

Posted in business building insurance, business buildings insurance, business insurance broker, commercial building insurance, commercial buildings insurance, commercial property insurance, commercial property insurance quote, commercial property owners insurance | Comments Off

Commercial building insurance – routine maintenance

Sunday, November 7th, 2010

Check through any commercial building insurance policy and there will be a clause, warranty or wording that states what you should do in the care of the building.

An insurance policy is not designed to replace a normal maintenance contract. You cannot expect to have a building that is not inspected regularly and then have a claim paid against, for example, water leaking through a poorly maintained roof.

You need to consider the policy wording and see whether you have to undertake certain types of maintenance at agreed intervals. One of the main ones is in respect of flat felt roofs. These types of roofs only have a certain lifespan. Even withe advancements since the 1970’s in materials, the more modern flat roofs still get damaged over time.

Many policies will state that you have to have the roof inspected every 6 or 12 months. In addition to this any repairs need to be undertaken immediately and,by an approved repairer. It is no good to say that you inspected the roof yourself. You will need to prove that it was a proper builder or roofer and be able to show receipts that you have paid them to do the work.

Some policies will also have a gutters and drainpipes clause (believe it or not) which again proves that these are cleaned and any debris removed, on a regular basis. This, you can usually do yourself, if you wished. If you had a loss and the adjuster can prove that it was due to build up of leaf mould over many years, then you could potentially be faced with a claim repudiation.

As ever, speak to your business insurance broker and get them to interpret the policy wording for you and ask them to confirm this in writing to you.

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Commercial property owners insurance – loss of rental income

Friday, November 5th, 2010

Under a standard commercial property owners insurance policy, you will have two main types of cover. The first of these is cover for the actual structure of the building and the second being property owners liability.

In addition to these two, there is one other main type of cover which is not always included as standard. This is for loss of rental income. You can insure, under most policies, for rental income payable or receivable. The main one is rental income receivable. This is where you, or your business own the building and receive rental income.

Your building is insured for certain perils, such as fire, storm, flood and burst pipes. If the building suffers a loss, you many not be able to rent the property out. Of course, it needs to be a substantial loss that renders the property uninhabitable and you would need to prove this to the insurers. Your cover should also apply if you have to agree a reduced rent for your tenant due to inconvenience. For example if they cannot use the whole of the property but do not want to actually move out.

This cover does not apply, in commercial cases, if the tenant simply does not pay their rent. It only covers you if there is an insurable loss to the structure of the building.

When arranging the cover, you will more than likely be dealing with a business insurance broker. One of the questions they will ask is what is the monthly loss of rental income. You will need, in the event of a loss, to prove your received rent over a period of time, say the three preceding months and the same period in the previous year.

The other type of cover, which is seen much less frequently, is loss of rental income payable. This is only found on policies that are arranged by the tenant under a full insuring and repairing lease. This covers exactly the same thing, but because the policy is not in the name of the actual property owner, it cannot cover received rent, but rent payable.

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Business insurance – what does average mean?

Saturday, October 23rd, 2010

If you have a business insurance policy, or you have just received a quote, you may be told by the broker that “average” applies to the cover.

You may well wonder what average means and how this affects the insurance. Your policy may contain a clause that is called something along the lines of Reinstatement Basis or Reinstatement Condition. It is one of the standard general definitions of a policy and applies to the vast majority of commercial insurance products. It is more commonly called average and it is extremely important.

An insurer wants to receive the correct premium for the risk they are facing. A 17 year old, male, living in an inner city with a sporty car is going to pay more than a middle aged family man in the country. So, if the 17 year old lies and says he is 47, he will not only get a cheaper premium but he will also have any claims he makes turned down as h has misrepresented the risk to insurers. They do not, and cannot, check on the validity of the information provided at quote stage. This is why you complete a proposal form or accept a statement of fact and this forms the basis of the policy. ie, if you lie the the policy is invalid.

Now think to a commercial policy. If you have a stock holding of £50,000 and you only declare £25,000 to the insurers, you will be underpaying that element of the cover by, say 30-50%. If there is then a loss the insurers will apply the average clause. You under-insured by 50%, so any claims settlement, whatever the amount, is reduced accordingly. So, if a flood destroyed £10,000 of your stock, the insurers would only pay 50%.

The same applies to buildings, with commercial building insurance, you need to declare a re-building or reinstatement cost for the property. If you mis-represent this amount to insurers then any claim will also be reduced.

For example, if your 1,000 square foot warehouse is £200 per square foot to rebuild, you should insure for £200,000 plus 20% for additional fees, costs and a contingency, ie £240,000. If you insured for less than the correct figure, you could face a reduced payment.

The secret is, to get a proper commercial valuation of the rebuilding cost, every 3-5 years. It may cost £2-300, but it reallyis worth it because you are safe in the knowledge that if the figure is wrong you have not only done all you can, you have also got the potential of suing the valuer.

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Commercial building insurance – the importance of maintaining your property.

Monday, October 4th, 2010

Anyone who owns, and has in force commercial property insurance, needs to ensure that at least once a year they sit down and read through their insurance policy and schedule.

The schedule is the document that gives the specifics about your building, ie sum insured, address, construction and location. The policy wording is the generic insurance policy that your insurers use for the particular type of cover you have. You coudl read through all of the commercial insurance policies in existence and they will all contain one particular clause, condition or warranty. This is, that you must adeautely maintain your building and undertake all repairs that are necessary.

If you do not maintain the building, and for example, the roof leaks, you could potentially find yourself without a claim being settled. Insurers are becoming more and more ruthless. This is not to say that they are turning down claims without cause, but they are trying to prevent the honest policyholders who have policies in force to protect the unforseeen circumstances, having to pay for those who expect insurance to pay out on every single claim they may make.

If necessary, you need to get a roofing contractor in on a regular basis to check that your flat, tiled or pitched roof is in good condition. If the insurers can prove that the roof was in poor condition, and therefore the loss was not really unforeseen, then you could be financially out of pocket.

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Commercial building insurance – frost cover

Tuesday, September 21st, 2010

Any business insurance policy, whatever type of trade it covers, will include certain exclusions, warranties, conditions and excesses. There are reasons for these being included. The more cynical will think this is the insurers trying not to provide cover. The more realistic view is that these need to be included because without them, the insurance companies would simply have to pay out for anything and everything. This would then lead to increased costs in premiums. As the amount of claims increases so would the premiums and this spiral would continue until it became unaffordable to arrange cover.

One of the standard exclusions is for frost damage. Last winter we saw unprecedented levels of storm and burst pipes claims. As far as frost is concerned, the actual damage caused by the frost, ie to brick work, is excluded. Whereas, the consequent damage, ie water seeping in, is covered.

The reason that frost is excluded is because it is a maintenance issue. A normal wind and watertoght building, in good condition, should not allow water to sepp into brick work and then for this to freeze, expand and cause damage.

It (frost damage) really only occurs under commercial building insurance polices. Certain insurers will allow restricted cover, maybe with a limited payment of a few thousand pounds. The reason that frost is excluded, is because your policy is not a maintenance contract. A building should not be allowed to get into such a condition that water can seep into the brick/cement work. If that is the case, then the building should be re-pointed or the bricks replaced or coated with a waterproof membrane (in the summer months!)

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