What Does Building Owner's Property Insurance Cover?

May 01, 2019

As an owner of revenue generating real estate, the chances are that you have significant assets tied up in the property. It is not only vital that you have property insurance but also have the right coverage for your building portfolio.

What does it cover?

Building Owners property insurance covers the buildings, structures, and contents that you own from direct physical damage.

Common claim examples:

1) A tenant starts a fire that spreads to multiple units

2) A hail storm damages a portion or the entirety of a building’s roof

3) A pipe bursts and floods a building

How much does it cost?

Property insurance is most often the most significant portion of a building owner’s insurance premium, accounting for 80-90% of the total cost. Not only are the buildings large and worth a considerable amount, but they are also exposed to much more risk than a traditional structure or home depending on the tenants utilizing the property.

Common problems and exclusions

Undervaluation of property – Although it is tempting to lower the property limit to lower the premium, there are severe penalties associated with undervaluing a building called a coinsurance penalty. It is also common to underestimate property values because of a failure to consider the cost of additional fixtures, plumbing, electric, and materials associated with commercial real estate.

Protective Safeguards – Protective safeguards are warranties that the property owner will maintain a specific protective measure for the insurance company to pay a claim. For example, many apartment property insurance policies have an agreement that the apartment owner will own and regularly maintain both a sprinkler system and a central station fire alarm before the insurance carrier will pay for a fire loss. These are often unavoidable, but it is something to be aware of and review.

About The Author: Austin Landes, CIC

Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.

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