Insurance companies carefully consider the likelihood of an owner’s filing a claim when determining the cost of a fire damage policy. This means weighing how many claims have been filed by the policyholder in the past, whether the policy covers insured losses or actual losses, and the individual risks of the property itself. Attorney Bill Voss examines the factors involved in determining premiums in commercial fire coverage, as well as how owners may reduce their fire risks and insurance costs.
How Insurers Determine the Cost of Commercial Fire Coverage
Insurers will determine the price of coverage after assessing the fire risks of your business—and if you are at too a high risk, they may decline to issue you coverage at all. When insurance companies perform inspections to determine a structure's fire rating, they will consider the following factors:
- Construction materials. Older structures or those made from highly-combustible materials will naturally cost more to insure than structures made from fire-resistant materials. The use of flammable materials in walls or stairways will likely impact the fire rating, while installing fire-resistant interior walls and secure fire doors can lead to discounts on premiums.
- Fire protection measures. Owners can significantly lower their insurance costs and their risks of a blaze by installing fire suppression systems such as automatic sprinklers, fire extinguishers, and automatic alarms.
- Location. Buildings in urban areas usually have better fire ratings than those surrounded by trees or further away from municipal fire protection and response. Business will likely have more positive fire ratings if they are located within 500 feet of a fire hydrant.
- Occupancy. The uses of a building can greatly affect its fire rating, especially if there are multiple businesses or tenants in the same property. If a retail shop shares one of its walls with a restaurant, the restaurant’s high fire risk will impact the fire rating of the entire building.
- Exposure. Even if your business is the sole occupant of the structure, external fire hazards can affect your fire rating. For example, if your business is located near a hotel, lumberyard, industrial property, or sits close to another structure, you may share the increased fire risks of nearby properties.
If you are having trouble getting an insurer to cover the costs of a fire, we can examine your policy and get you the full amount you are owed. Simply fill out the form on this page today to contact the Voss Law Firm or order a free copy of our book, Commercial Property Owners Must Read This BEFORE Filing an Insurance Claim.