Improving the biography of a building can help reduce the cost of insurance premiums. As you might expect, an insurance company looks to minimize their own exposure when taking on a new risk. So, when it comes to real estate, presenting the property in a more favorable light can often make it more appealing for a company to underwrite. It’s our job to help the insurance companies understand the current condition of the real estate and —in turn— save you money.
Strategizing throughout the year, the insurance broker and building owner should work together to present the property in the best light and to keep the property’s risk profile up to date. Be sure to advise your broker of building upgrades and repairs throughout the year. Updates to major systems, such as heating, plumbing or electrical, can greatly improve a risk profile, which may lead to more competitive pricing and broader coverage when it comes up for renewal.
Since owners cannot have total control over the cost of their insurance premiums, these five tips will help building owners negotiate the best rates and coverage at renewal time.
#1. SAFETY IS THE KEY
Detail all safety-related improvements made to the building. Provide narrative on recent enhancements to security (which include measures like a 24-hour doorman and full-time video surveillance). It’s these safety features that the insurance company wants to find. In fact, you can receive credits for newer systems!
#2. SHOW THE BUILDING SOME LOVE
Avoid potential liabilities (such as missing handrails or cracks in the sidewalk). Maintain the exterior of the building. If you are aware of an issue, fix it before the insurance company inspects and points out the issues. Below are three suggestions to enhance the profile of a building:
● Hard-wired smoke detectors
● Adequate lighting in common areas
● Child-proof safety windows
#3. MASTER POLICY IS THE WAY
In most cases, building owners can negotiate better rates by scheduling different properties on a single master policy. Too often, underwriting individual buildings on their own closes the door to getting discounts and preferred terms. In addition, a master policy allows owners to consolidate their individual policies and more easily monitor the insurance for their entire portfolio.
#4. STAY UP-TO-DATE ON BUILDING VALUATIONS & LOSS HISTORY
Replacement value is different than market value. It’s important to remember that over time, the cost of labor and material increases. If you’re not keeping up to date on the estimated cost per square foot to rebuild, you might be left under-insured. When it comes to rental income, make sure you’re accounting for changes in the rent roll.
Take on More Risk. Increasing the deductible is often one of the easiest ways to reduce costs. Ask your broker what it cost for higher retention limits. In certain situations, especially with buildings with a loss history, a higher deductible can save on premium. Just remember, you as the owner have more skin in the game now!
Frequency & Severity. When analyzing a risk, insurance companies use a 5-year look back for claims. While property claims occur on a specific date, GL claims can sometimes take years to develop. Therefore, an owner should be staying on top of the open claims to see that they don’t continue to drag on.
#5. NOT ALL INSURANCE BROKERS REALLY KNOW HOW TO HANDLE REAL ESTATE
Work with an insurance broker who specializes in placing real estate business. An experienced broker will have access to exclusive programs and specialty markets which can offer the client two things: the broadest coverage terms available and aggressive pricing.
Learn More About Multifamily Insurance
Over the past 15 years, I’ve helped many multi-property real estate owners by creating their own custom-tailored comprehensive risk management insurance program. In some cases, cost savings for the multifamily owner/manager reflected a reduction in annual premiums of over 15%-20%. Having the ability to aid clients in generating master policies, permits an owner to use the leverage of premium volume to reduce their overall costs.
Opinions expressed in this article are solely the author’s opinion, not intended to provide the reader with legal or any other professional advice. Should you need advice or opinion, consult with a qualified professional to address your specific needs.