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Commercial Building Insurance

Owning and managing apartment or commercial buildings is not an easy business. Maintaining the property, collecting rent, responding to tenant requests, and staying current with laws and regulations are just a few of the challenges you face. By the time it comes to the insurance, it probably feels like another “task”, “expense”, and just a “necessary evil”.

These buildings are valuable assets and an important part of your investment portfolio. If something were to happen, it could be financially devastating and impact your personal financial health. Ensuring you have the proper coverage will not stop the loss from happening, but it will minimize the costs of recovery.

At JSG Insurance Services, we are experts at helping apartment and commercial building owners develop an insurance plan that is cost effective and provides the protection you need, bringing you peace of mind. We also provide side-by-side comparisons of the key coverages you have and our proposed coverages to help you make informed choices.

We work with several national and regional insurance companies to find the best one for your needs.

Watch the case studies videos below to see how we have helped other business owners.

3 Common Mistakes People Make:

  1. Selecting the wrong deductible – Apartment or commercial building insurance is a significant expense. The larger the property, the higher premium you can expect to pay. One of the major premium impacts is the deductible you select. While it makes sense that a higher deductible translates to a lower premium, the savings can be substantial.

    For example, there may be a 10% premium reduction between a $1,000 and a $5,000 deductible. If your building premium is $30,000 with a $1,000 deductible, the revised premium with a $5,000 deductible would be $27,000, saving you $3,000 annually. If you went three years without a loss, you would save $9,000. However, if your insurance premium were only $7,000, the 10% savings would only be $700 annually and that may not be worth it to you.

    When evaluating deductibles, it is also important to think about how large a loss should be before you decide to open a claim. For example, if you had a $1,500 claim and a $1,000 deductible, it may not make sense to collect the $500 difference and have a claim on your record. Another consideration when selecting a deductible will be your financial position and ability to pay a portion of a loss “out of pocket”. The more you can pay “out of pocket” allows you to consider a higher deductible.

    Selecting the right deductible is based on your risk tolerance, your financial ability to pay “out of pocket” as needed, and the potential savings you can achieve at different deductible levels. We can help you determine the deductible level that makes sense for you.

  1. Selecting insufficient Building Ordinance coverage – One of the most overlooked coverages is Building Ordinance. This coverage addresses the extra costs necessary to bring your building up to required codes after a covered loss. This includes tearing down and removing undamaged portions of a building, rebuilding the undamaged portion, and adding the extra features needed to meet current building codes. There are typically three parts to this coverage:
  • Coverage A – Loss to the undamaged portion of a building. If only part of your building is damaged and current building codes require the undamaged portion to be torn down and rebuilt, this coverage would pay the extra cost to rebuild the undamaged portion.
  • Coverage B – Demolition of the undamaged portion of a building. If only part of your building is damaged and current building codes require the undamaged portion to be torn down and rebuilt, this coverage would pay the extra cost to demolish the undamaged portion of the building and remove the debris.
  • Coverage C – Increased cost of construction. This coverage includes the costs related to rebuilding the building to meet current codes. Examples include adding interior fire sprinklers and compliance with the American Disabilities Act (A.D.A.). Compliance with A.D.A. includes items like wheelchair ramps, wider doorways, installation of handrails, and many other upgrades that significantly increase the cost of rebuilding.

Without this coverage, the extra costs associated with these items are not covered, even if you have sufficient building coverage.

  1. Not requiring tenants to carry their own liability insurance – Whether your tenants are residents or businesses, they have their own liability exposures. As the landlord, do you want to be responsible for their liability? For example, what happens if a resident accidentally starts a fire that damages their unit and the one next door? What about a person who slips and falls while visiting one of your tenants’ businesses? In both cases, if your tenants do not have coverage, your insurance will need to respond which will likely raise your rates.

    We recommend that your lease agreement require residents and tenants to carry their own coverage and name your legal entity as an “additional insured”. These insurance policies are also beneficial to your residents and tenants as well. Beyond checking for coverage when a lease starts, it is just as important to check annually to ensure the policies remain active. In most cases, we can help you with the evaluation and tracking of your residents’ and tenants’ insurance policies.

    With some insurance companies, if you can document that you require tenants to carry their own liability coverage, you may be eligible for a discount.

Buying Commercial Building Insurance FAQ’s

You’re in good company

How can I lower my insurance premiums?
Insuring apartments or commercial buildings can be expensive, however, there are some steps you can take to help reduce the costs.

      • Increase your deductible – The difference in rates between various deductible levels is a percentage. For example, there may be a 10% premium reduction between a $1,000 and a $5,000 deductible. If your building premium is $30,000 with a $1,000 deductible, the revised premium at $5,000 would be $27,000, saving you $3,000 annually. Selecting the right deductible is based on your risk tolerance, your financial ability to pay out of pocket as needed, and the potential savings you can achieve at different deductible levels.
      • Apply for “credits” – Most insurance companies have the ability to apply “credits” (discounts) to your policy for items that help reduce losses. Credits may be available if you have interior sprinklers, central station alarms, cameras, or gated entries. Some insurance companies will apply credits if you use a professional property manager or have lengthy experience as a landlord. The longer history you can document without claims can also lower your premium.
      • Leverage multi-policy or multi-location discounts – Some companies will provide an additional discount if you have an additional policy with them. For example, if you have employees, placing your worker’s compensation with the same insurance company as your building can lower your premium. Similarly, if you have multiple buildings to insure, keeping them with one carrier can result in lower premiums.
      • Get quotes from other companies – If you are with an agent that can only offer one insurance company, it makes sense to check with a broker that works with multiple companies to ensure the rates you have are competitive. However, we also recommend that you compare the coverages as well, like what we offer with our side-by-side comparison to ensure that you are making an informed choice.
What is coinsurance and why does it matter?

Coinsurance is a penalty that can be applied by an insurance company if a building is not insured to its full replacement value. If your policy says it has a 90 percent coinsurance clause, that means your building must be insured for at least 90 percent of the actual replacement value. If the replacement value of your building is $1,000,000, it should be insured for that value to protect you against a total loss. However, if the building is insured for less than $900,000 (90 percent of $1,000,000), then the coinsurance penalty will apply to a property loss. This penalty will apply, even if the loss is less than the actual building coverage you have. Consider the example below:

  • The replacement value of your building is $1,000,000
  • You have only insured it for $750,000
  • The coinsurance is 90 percent
  • You have a $200,000 loss to your building

While you would expect to get the $200,000 for the claim (since you had $750,000), that would not be the case as the coinsurance penalty would be applied.

Since the building was insured for only $750,000 versus the minimum required $900,000 (due to the 90 percent coinsurance clause), you were insured for 83.3% of the minimum required ($750,000 divided by $900,000). As a result, that 83.3% will be used to reduce the $200,000 claim amount. The amount you would receive would be $200,000 x 83.3% = $166,000, leaving you with a gap of $34,000.

Beyond my building policy, are there other coverages I should consider?
  • Workers Compensation – If you have any employees (even one part-time employee) the law requires you to carry Workers Compensation. This protects both you and the employee including paying the employee while injured, in the event they are unable to work.
  • Cyber Liability – If your business maintains private personal or employee information, you are a target for hackers. As a building owner, you likely will have confidential information about your employees or tenants.  If this information is compromised, the legal requirements and fines are severe.  The National Cyber Security Alliance recently released statistics that show 20% of small businesses experience such an attack every year, and that 60% of these businesses were forced to close within 6 months of being   This coverage pays the various costs associated with this type of loss.
  • Employment Practices Liability Insurance (EPLI) – Per the Insurance Information Institute, the number of lawsuits filed by employees against their employers has been rising. EPLI provides protection against many kinds of these suits. The most common claims are for:
    • Sexual harassment
    • Discrimination
    • Wrongful termination
    • Retaliation

    This coverage pays for legal representation, and if necessary, will pay the claim on your behalf.  In some cases, policies will include third party discrimination which may be helpful if someone sues you for a violation of the Americans with Disability Act.

    We can help you determine which coverages your business will need.

What is an umbrella policy, and do I need one?

Owning an apartment or commercial building leaves you open to large liability losses. This could be a slip and fall or something more tragic causing severe injuries. As an example, one of our apartment building clients had a situation where bees attacked a little girl as she climbed a tree near a hive. Although the client was working to remove the hive and had a sign not to climb the tree, the girl was injured and the final claim settlement was over $3,000,000. He had a $5,000,000 umbrella that covered the claim. A typical building policy comes with $1,000,000 liability for any one occurrence. However, if someone is injured in an apartment or commercial building, it is sometimes seen as an “opportunity to win the lottery”. In cases with a severe injury, or in the example above, the $1,000,000 liability limit is not sufficient.

An umbrella policy provides an extra layer of liability coverage that goes on top of the existing $1,000,000 that your building policy provides. For example, if you had the building policy with a $1,000,000 liability and added a $1,000,000 umbrella, you would have $2,000,000 for a single occurrence. Umbrella policies are sold in increments of $1,000,000 and most companies offer up to $10,000,000. A single umbrella can also span over multiple property locations if they are owned by the same entity and insured together under one policy.

As you build a portfolio of buildings or have other assets to protect, an umbrella is a low-cost solution to ensure that you have the liability coverage you need.

Our Clients Say It Best

“JSG always takes the time to evaluate and find solutions to our issues immediately. The solutions are usually sensible and applicable to our situations. JSG always responds in a timely manner. Jon Gardner is honest and direct so we save time to research and do comparisons on our own” — Shirley L.

“I very much have enjoyed working with Jon. As a retired attorney I cannot help but being organized, very detailed oriented and punctual. I need to trust the person I am working with and I don’t want to chase that person. Jon has been tremendous. He has exhibited all of these sought characteristics and has been a pleasure to work with. Jon knows his business and breeds confidence. I have zero hesitation and enthusiastically recommend Jon Gardner and JSG Insurance Services to all those fellow apartment and commercial property owners. You won’t be sorry” —
Doug A.

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    Have a question?
    Feel Free to Ask

    If you have other questions, ask us here and provide your e-mail address. We will answer your question within 2 business days. We promise that we won’t spam your e-mail address or sell it to a third party.