There are lots of ways you can reduce your commercial property insurance premium. But, some “red flag” situations are so obvious, it might surprise you that your insurer hasn’t caught them already.
One of the major headaches for any business owner is dealing with commercial property insurance. But there are specific ways to save a considerable amount of money regarding this type of insurance. In this issue, we will talk about some of those ways. We’ll also discuss what you can do to reduce your risk when insuring your business property.
Whether you are buying or renting commercial property, here are ten ways you can dramatically reduce your insurance bill:
If you write about real estate investing, you need to be clear about what you are talking about. It’s easy to get confused when talking about things like depreciation, basis, and cap rate. To help you understand these concepts, I will explain them very simply here and then break them down even further so you completely understand them.
This means the amount you paid for the property, less any improvements made to the property. For example, say you purchased a house for $100,000 in excellent condition. After two years of living in that home, you decide to sell it and buy another one that needs a little TLC. Before you put your house on the market, you make some necessary repairs, and it now costs you $10,000 to bring it up to snuff. The “basis�” of the property is now $90,000.
When you sell your house, the company you use for an appraisal will calculate how much the place has depreciated since you purchased it. Depreciation is based on the house’s condition when you first bought it. Therefore, the lower the state of the house when you buy it, the more depreciation it will have. When you sell the home, the amount of depreciation will be subtracted from the sales price and passed on to the buyer.
This is the amount of return you can expect to receive on the money you invested in the property. It is determined by dividing the basis of the property by the sale price of the property. For example: If a property was recently sold for $200,000 and it had a $50,000 basis (meaning it cost you $100,000 to buy it), then its cap rate would be $50,000/$200,000 or 25%.
Know Your Policy Limits
There are many reasons a person might not purchase commercial property insurance. If you offer a compelling reason to buy, you increase your prospect’s chances to buy. Here are three:
Most people believe they do not need commercial property insurance because they have their homeowner’s policy. However, the truth is, every business owner in the U.S. should have both a homeowners policy and a commercial property policy. The benefits of having both approaches cannot be overstated.
Many business owners do not purchase commercial property insurance because they believe it is too expensive. This is 100% false. You can easily find quotes from multiple companies showing commercial property insurance to be much less than what most individuals pay for car insurance.
And finally, many business owners do not purchase commercial property insurance because they think their liability insurance covers them. This is also false. Even if your liability insurance company does have a business coverage part, it is almost guaranteed that part of your policy will not apply to your commercial real estate.
Shop Around for the Best Rate
While commercial insurance rates vary widely, you can get a general idea of what your premiums will be by shopping around with several companies. Here are some tips on how to make sure you’re getting the best rate: First, you should shop around. This means calling different companies and asking about the differences between their rates and policies.
This will allow you to compare the rates at each company. Ask which ones provide lower rates and which ones offer better service. Look for a company willing to work with you and give you the lowest rates. Next, once you find the lowest rate, make sure you pay it every year. This will ensure that you never have to worry about getting higher rates in the future.
Negotiate for a Lower Rate with Integrity
The goal of any business is to make a profit. The way this is done is by finding ways to decrease costs. One of the ways this can be done is by negotiating the insurance price. Insurance policies are priced at a fixed rate, but the actual premium charged can vary based on the risk level, determined by factors such as location, type of building, and the number of employees.
Reduce Your Claim Amount by Taking Care of Business
The first step to doing this is to determine what your total dwelling coverage should be. Of course, this is going to vary depending on the type of property you have and where you live, but generally speaking, you should strive for the highest level of coverage that is affordable.
Next, find out what percentage of the cost of your coverage you are responsible for. The good news is that, in most cases, this number is deficient. The bad news is that it’s shallow! The policyholder pays for only about 7% of the cost of commercial property insurance. The insurer pays for the vast majority (93%) of the fee.
Make Sure You Have Enough Business to Insure
Many small business owners think they are protected by commercial property insurance because of their business licenses and permit. But, this type of insurance only covers the structure of the business. It does not cover inventory, customer lists, goodwill, etc.
This means if your business is forced to close due to a covered cause (like a fire), the insurance company can decide not to pay you for your inventory or other tangible assets. Therefore, it is essential to ensure your personal property with separate homeowner’s insurance.
Find Alternative Sources of Income
There are many alternative sources of income for commercial property insurance, but the three most common ones are better security, lower price, and increased coverage. In addition, there are several different kinds of security measures you can use to improve the safety of your property and its contents.
These include increasing the valuation of the improvements you make to the property, adding additional features and exits to the building, using a guard service, having your tenants provide increased security for the establishment, and other means.
You can also reduce the price of your commercial property insurance by choosing a carrier who offers discounts based on the nature of your business. You may also increase the amount of coverage you have by buying extra endorsements or riders.
Keep Records of Everything That Could Help Reduce a Future Claim
There are so many things to think about when you’re trying to reduce your commercial property insurance costs, and the number one thing you should keep track of is the amount of time you have been in business.
This will help you determine if you’ve been a consistent policyholder and whether or not your commercial property insurance costs have increased. You can also use this information to decide what discounts and premiums you qualify for.
Maintain Your Building and Personal Property
An essential part of your commercial property insurance policy is coverage for your building and personal property. In addition, most policies provide liability coverage for buildings and emotional property damage and even some coverage for loss or destruction of business records. But be sure you understand the scope of the range.
Consider Specialized Insurance for Commercial Real Estate
Specialized insurance policies are becoming more and more popular in the commercial real estate industry. A technical approach usually has much lower premiums than a standard property/casualty insurance policy. It offers additional benefits like extra coverage for business interruption, building protection, and even earthquake insurance.
If you’re considering buying commercial property insurance, you can save hundreds, or even thousands, in annual premiums by using these ten tips. The same principles and strategies that I apply to my insurance can be applied to commercial insurance. These are some of the most effective ways to save on your commercial insurance.