Not long ago, a local business owner confided that they had made a big mistake before buying their last commercial building: they didn’t call their insurance agent first.
We know what it’s like to fall in love with a commercial property. That moment is special – you envision your business in a new location, having room to grow and prosper. You’ll sign the contract, take the keys, and you’re in business. However, what’s often overlooked are the potential insurance pitfalls that can arise if you don’t do a little research before signing that contract. In this article, we’ll explore three common scenarios where a little time spent researching your commercial insurance needs might save you some serious headaches down the road.
Look up before you jump in
Buying commercial insurance might not be as exciting as buying a commercial property, but it is way more important. After all, no one wants to own an empty building with a great location!
Although a building may already a sprinkler system, it may not have been designed for a every use or occupancy. When you’re buying a building, it’s important to make sure that it has the right fire suppression system in place for your specific business operations. Fire suppression systems are designed based on a variety of factors such as storage height and fire load. Be sure the sprinkler system will be adequate for your needs.
Insurance companies are unlikely to inspect your new building until after you move in. Before you sign the contract, have a professional inspection to make sure that the sprinklers and alarms have been properly installed and maintained so that you are aware of potential safety issues and costs before you close the deal.
Some insurance companies will offer discounts for sprinklers and alarms, and many require specific fire suppression systems for some business operations. Call your insurance agent ahead of time to learn more.
Location, location, flotation
In a competitive marketplace, it might seem sensible to move fast on a purchase. But is that building in a flood plain?
Flood insurance can be a lender requirement and an unexpected cost. Know also that flood insurance policies have many limitations. Many businesses struggle to recover from flooding events, even with an insurance policy in place.
Find out if the property, critical access roads or even nearby properties are in flood zones. If your business will depend on an anchor store for traffic, it might be good to know about flooding risks before you buy. Your insurance agent can help check flood zones for you before you sign on the dotted line.
Tips for landlords and investors
How do insurance companies evaluate commercial rental properties? Some factors are obvious – age, construction type, protective devices and so on.
Insurance companies also look at the types of businesses occupying rental properties. Sometimes, it will be obvious that a tenant looks like a high risk to an insurance company – i.e. a fireworks store.
However, many business operations feature subtle risks such as toxic cleaners, chemicals or painting operations that are tougher risks for insurance companies.
Before you rent out your space to a tenant who will cause insurance problems for your rental property, check in with your insurance professional.
Call us before you sign that contract
We want your business to be safe and profitable. Whether you are a tenant, a landlord or purchasing a building for your own business use, call us before you sign that contract. We are here to listen and advise, and help you avoid costly surprises and mistakes.