Terrorism Risk Insurance and What You Need To Know

Terrorism Risk Insurance and What You Need To Know

Terrorism Risk Insurance and What You Need To Know

Terrorism has become an unfortunate fact of life. From the Nashville Christmas bombing, the Pittsburgh synagogue shooting to the Sandy Hook Elementary School tragedy to the Las Vegas Strip concert massacre, the news is filled with headlines related to acts of terrorism or thwarted attempts. These types of tragic events are changing how business owners are protecting their interests. You may want to consider a Terrorism Risk Insurance policy to protect your business.

“Commercial Property Insurance policies often contain exclusions for acts of terrorism,” said Carolyn Reiter, Associate Vice President, Global Excess Partners, New York, New York. “If the FBI determines the Nashville incident is an act of terrorism, those impacted may be denied coverage through their current Commercial Property Insurance policies.”

Terrorism Risk Insurance

Domestic and Foreign Terrorism

Terrorism differs from other catastrophes because it is not an aspect of weather or nature. However, it shares the same problem of insurability with its natural peers. There are two distinct types of terrorism: domestic and foreign. Domestic terrorism involves terrorist acts (or plans) by citizens of the same country where the act is committed. The reason for the act (or planned act) generally involves some domestic political agenda.

Foreign terrorism involves acts of individuals from one (or more countries) who wish to disrupt the lives of another country’s citizens in order to advance a particular cause.

The Real Risk to Your Business

The perpetrators of terrorist attacks and the methods they use continue to shift and relatively unprotected targets are becoming a greater focal point. Property damage and bodily injury are the primary risks associated with terrorism, yet there are liability factors that you should consider to best safeguard your business, including:

  • Business interruption loss
  • Fiduciary liability for corporate directors and officers
  • Pollution loss and liability
  • Privacy and network security liability

At least 45 businesses were da­­maged in the Christmas Day bombing in Nashville, Tennessee that decimated a block of downtown buildings. Local police and the Federal Bureau of Investigation (FBI) are still investigating why a 63-year-old Nashville area information technology consultant set off the explosion in his RV, killing himself and causing widespread destruction.

The bomb was detonated near an AT&T telecommunications hub, temporarily freezing mobile and internet systems in five states. As affected business owners assess the damage to their properties, they are also questioning whether their insurance policies will cover the repairs. If it is classified as terrorism, property owners without appropriate insurance coverage worry they may have to pay out of pocket for the damage.

Terrorism Risk Insurance

Types of Terrorism Risk Insurance Solutions

Domestic terrorism coverage is available in traditional policies and stand-alone terrorism risk insurance. Traditional policies, including commercial general liability and property policies, may provide some coverage for terrorism risk if not expressly excluded.

Workers’ compensation insurance is another traditional policy that may provide some form of terrorism coverage. Unlike property and casualty policies, workers’ compensation policies will not have terrorism (or war) exclusions.

You may also consider purchasing stand-alone terrorism coverage. Stand-alone policies typically exclude:

  • Political risks, including loss resulting from strikes, riots, civil commotion, rebellion, revolution, war and insurrection
  • Cyber-related loss and liability
  • Nuclear, biological, chemical and radiological hazards, like anthrax

Terrorism Insurance coverage is available through a standalone policy or the federally-backed Terrorism Risk Insurance Program (TRIP),1 authorized by the Terrorism Risk Insurance Act of 2002 (TRIA) in the wake of the September 11, 2001 attacks and extended through 2027 by the Terrorism Risk Insurance Program Reauthorization Act of 2019 (TRIPRA). Nevertheless, many business owners have no Terrorism Insurance coverage at all, leaving them vulnerable at a time when terrorism is an escalating concern and businesses are already struggling to survive in a pandemic-induced recession.

Many times people believe that if they aren’t right next to something like an NBA arena or a National Monument that they don’t need it. But in the case of the AT&T building in Turlock, that could have impacted nearly 1/4 – 1/3 of our downtown.

Terrorism Risk Insurance

Stand-alone Terrorism Risk Insurance Coverage

Terrorism Insurance can be purchased as a standalone policy—without a minimum loss requirement. Such policies include broader definitions of acts of terrorism that do not require government certification, Reiter said.

If you opt for stand-alone coverage, selecting the policy with the best terms involves more than just ensuring coverage extends beyond “certified acts of terrorism.” Valuation terms in stand-alone terrorism policies should be carefully reviewed to ensure you are appropriately compensated for loss and damage, even when actual repair or replacement isn’t possible or ideal.

It’s also important that specific terms are well defined, such as what constitutes an “occurrence” and how the number of occurrences associated with a given claim will be determined.

Coverage under a standalone Terrorism Insurance policy can also include loss of business income such as could occur during a forced closure due to property damage or to allow a criminal or forensic investigation to take place. Terrorism Liability Insurance is another important consideration, providing coverage for bodily injuries or deaths that may occur on a business’ premises due to terrorism.

 A standalone Terrorism Insurance policy could mean a faster recovery for business owners in the aftermath of a terror attack, Reiter said. “There is typically a significant lag time to process claims and issue payments under a government-backed program, especially compared to a general insurance claims transaction,” she explained. “Coverage under a standalone Terrorism Insurance policy could help a business start recovering from an attack much sooner.”

Other Policy Terms to Consider

Traditional policies or stand-alone terrorism risk insurance generally will include these terms:

  • Sue and labor. What property is reasonable to protect, recover or save after a general casualty loss may differ from what is appropriate following an act of terrorism. Avoid disputes by tailoring language in “sue and labor” provisions accordingly.
  • Expediting expenses. After an event, you want to be able to return to “business as usual” as quickly as possible. However, the costs incurred to sustain operations or expedite repairs in the wake of a terrorism incident may vary considerably from any other casualty loss. It may be appropriate to expand terms beyond “reasonable and necessary” costs to include security or healthcare-related expenses.
  • Increased construction cost. A terrorism incident may prompt legislative or other practical requirements that may increase the cost of demolition and compliant repair.
  • Pollution exclusion. The “act of terrorism” may prompt the release of hazardous substances — increasing the cost of the claim. Policies should not exclude the cost associated with a release of “pollutants” that is an indirect result of an otherwise covered “act of terrorism.”

For more clarity on how to protect your business from exposure to terrorism risk, reach out to your insurance professional and review the type of insurance coverage and policy terms that are right for your business.

California’s Leader in Insurance and Risk Management

As one of the fastest-growing agencies in California, GDI Insurance Agency, Inc. is able to provide its clients with the latest and greatest of what the insurance industry has to offer and much, much more. The GDI team has developed an “insurance cost reduction” quoting plan, that provides you with the best coverage at the best rate!

We are headquartered in Turlock, CA, with locations across the heart of California’s Central Valley, Northern California and beyond to provide a local feel to the solutions and services we provide our clients. We pride ourselves on exceeding our client’s expectations in every interaction to make sure that our client’s know how much we value and appreciate their business.

Contact us today 1-209-634-2929 for your comprehensive business insurance quote!

The Newly Acquired or Constructed Property Extension

The Newly Acquired or Constructed Property Extension

The Newly Acquired or Constructed Property Extension

As a business owner, your commercial property needs can change over time to help meet operational requirements and satisfy customer demands. Specifically, expanding your business will likely require you to obtain additional property. When acquiring additional business property, however, it’s important to reassess your commercial insurance coverage and ensure you will remain adequately protected following such an expansion. Fortunately, the newly acquired or constructed property extension found in many commercial property policies can offer temporary protection in these situations.

Review the following guidance for an outline of key coverage features and limitations for the newly acquired or constructed property extension.

Key Features of the Newly Acquired or Constructed Property Extension

At a glance, most commercial property policies offer newly acquired or constructed property coverage as an extension of your existing building or business personal property insurance. This extension can provide protection for commercial property that you acquire throughout your existing policy period.

You can typically apply the newly acquired or constructed property extension to your existing building insurance policy in the following situations:

  • When you construct a new building—If you decide to construct a new building for your business, this building should be covered by the extension—as long as it’s located at the premises listed in your existing policy declarations. For example, if you decide to build a new and improved structure in the same spot as your existing building, you will remain covered. Keep in mind that although this extension can offer protection for your building while it’s under construction, it does not provide coverage for the actual construction project. Be sure to secure additional insurance for construction project protection.
  • When you acquire a building at a new location—In the event that you acquire a building at a different location from the premises listed on your existing policy declarations, you could still be covered by the extension—depending on how you use the new space. For instance, most policies allow the extension to apply if you use the new building as a warehouse or for a similar purpose as your current premises.

The new extension can also be applied to your existing business personal property insurance policy to provide protection for commercial property stored at the following locations:

  • A newly acquired building— If you acquire a building at a different location from your existing premises, the extension should cover any property within that building—including the property acquired after your policy inception date.
  • A newly constructed building—If you decide to construct a new and improved building at your existing premises, the extension should cover any property within the new structure—including the property acquired after your policy inception date.
  • Your existing building—If you obtain additional property for your existing premises (e.g., new office furniture), the extension should cover this new property.

This extension generally does not apply to personal property of others that is temporarily in your possession during the course of installing or performing work on that property. Additionally, coverage for personal property of others that is temporarily in your possession during the course of manufacturing or wholesaling activities by your business is also excluded.

Newly Acquired or Constructed Property Extension

Key Limitations of the Newly Acquired or Constructed Property Extension

It’s important to note that the newly acquired or constructed property extension is a temporary insurance solution. This extension is only intended to offer protection for your business until you contact your insurer and have any newly acquired or constructed property officially added to your policy.

The new extension is also subject to certain limits. These limits usually span between $250,000 and $1 million for newly acquired buildings, and between $100,000 and $500,000 for newly acquired personal property.

Your new property will be subject to these limits until you inform your insurer of the acquisition. Once you contact your insurer and have the new property officially added to your policy, it will be covered at the limit listed on your building insurance or business personal property insurance policy. Make sure you update your policy limits to reflect the added value of any new property.

Further, this extension is typically subject to the following time and value limitations:

  • Time limitations—Under most commercial property policies, newly acquired or constructed property can only be covered by this extension if you inform your insurer of the acquisition within a set number of days and pay any additional premium that your insurer charges. In terms of the coverage period, protection under this extension ends after a set amount of time has passed since you acquired the property or started construction on it—usually between 30 and 180 days.
  • Value limitations—Some commercial property policies only provide coverage under this extension if you also satisfy specific insurance to value standards (the ratio of your limit of coverage to the value of your insured property). Such standards might include having a coinsurance percentage of at least 80% or possessing insurance that’s written on a value reporting basis.

Keep in mind that every commercial property policy is different. Be sure to review your unique policy to understand the full extent of your coverage as it pertains to the newly acquired or constructed property extension.

GDI Insurance Agency, Inc.

California’s Leader in Insurance and Risk Management

As one of the fastest growing agencies in California, GDI Insurance Agency, Inc. is able to provide its clients with the latest and greatest of what the insurance industry has to offer and much, much more.

We are headquartered in Turlock, CA, with locations across the heart of California’s Central Valley, Northern California and beyond to provide a local feel to the solutions and services we provide our clients. We pride ourselves on exceeding our client’s expectations in every interaction to make sure that our client’s know how much we value and appreciate their business. Contact us today 1-209-634-2929 for your comprehensive commercial property insurance quote!

Insurance Considerations for Riots, Vandalism and Civil Unrest

Insurance Considerations for Riots, Vandalism and Civil Unrest

Insurance Considerations for Riots, Vandalism and Civil Unrest

Riots, vandalism and civil unrest can create unique challenges for business owners—resulting in stolen, damaged or defaced goods and extensive property damage. That’s why it’s crucial to secure proper commercial insurance coverage to adequately protect your business in the event that such a situation occurs within your community. 

Review the following guidance for an outline of various insurance solutions that can offer compensation for losses related to riots, vandalism and civil unrest, as well as best practices to consider when making claims in these situations.

riots vandalism and civil unrest
VanVnAV

Coverage for Riots, Vandalism and Civil Unrest

The following forms of commercial insurance coverage can provide protection in the event that your business suffers a loss related to riots, vandalism or civil unrest:

  • First-party property insurance—This form of coverage can offer compensation for physical losses or property damage to the insured premises and contents. Losses caused by riots, vandalism or civil unrest are typically covered on both “named peril” and “all risk” commercial policies. However, be sure to review your policy to ensure it doesn’t exclude these situations. Keep in mind that your policy might utilize different terminology for these situations (e.g., “civil commotion” as opposed to “civil unrest,” or “riots” and “malicious mischief” as opposed to “vandalism”). Make sure you understand all policy definitions.
  • Business interruption insurance—This type of policy (also known as business income insurance) can provide coverage for loss of income that results from having to temporarily halt business operations to recover from a physical loss or property damage to the insured premises. For your policy to be triggered, the halt of business operations must be directly caused by a physical loss or property damage that was incurred by a covered peril—such as a vandal smashing your property’s windows with a brick. In addition, some insurers might not allow your policy to be triggered unless the physical loss or property damage results in a “complete and total” halt of business operations. This means that if the physical loss or damage only affects some of your operations—but not all—you might not be covered. With this in mind, be sure to review your policy wording to understand the full extent of your coverage.
  • The civil authority clause—Most business interruption policies also include a civil authority clause, which can offer compensation when an action or order of civil authority temporarily prevents or restricts access to the insured premises—forcing the affected business to either limit hours or halt operations altogether. Although this clause still requires a physical loss or property damage to occur in order to be triggered, the damaged property does not necessarily have to be owned by your business—it typically just needs to occur within a set distance of your operations.
  • Extra expense insurance—This type of policy can provide coverage for additional expenses that result from continuing business operations while the insured premises is being repaired or replaced due to a physical loss or property damage that was incurred by a covered peril. This might include costs such as the added expense of shipping necessary business supplies overnight rather than at the standard delivery rate in order to resume operations as soon as possible. 
riots vandalism and civil unrest

Best Practices When Making a Claim

If riots, vandalism or civil unrest take place within your community and result in losses for your business, consider these best practices when making a claim:

  • Report it immediately—Be sure to report the incident right away to the local authorities and consult your broker for immediate claims assistance.
  • Prevent additional losses—When the loss occurs, try to do everything you can to mitigate the risk of further damages (e.g., boarding up your property’s windows and doors). However, only take these precautions if it is safe to do so. Avoid any mitigation measures that could put you or your employees at risk of injury or fatality.
  • Beware of waiting periods—Make sure you consider any waiting periods or other deductibles that might apply when making a claim. For example, most business interruption policies are subject to a 72-hour waiting period—meaning that you won’t be covered for any loss of income that occurs for the first three days following the incident.
  • Document all expenses and damages—To ensure the best possible compensation for your loss, be sure to document the full extent of the damages that your business incurred by taking plenty of pictures as evidence. Further, make sure you keep track of all expenses related to the loss by saving receipts and bank statements.
GDI Insurance

California’s Leader in Insurance and Risk Management

As one of the fastest growing agencies in California, GDI Insurance Agency, Inc. is able to provide its clients with the latest and greatest of what the insurance industry has to offer and much, much more.

We are headquartered in Turlock, CA, with locations across the heart of California’s Central Valley, Northern California and beyond to provide a local feel to the solutions and services we provide our clients. We pride ourselves on exceeding our client’s expectations in every interaction to make sure that our client’s know how much we value and appreciate their business. Contact us today 1-209-634-2929 for your comprehensive business insurance quote!

Employee Training to Combat Human Trafficking

Employee Training to Combat Human Trafficking

Employee Training to Combat Human Trafficking

California has enacted two laws that require certain employers in the hospitality and transit industries to provide employee training to combat human trafficking

The new laws, known as SB 970 and AB 2034, went into effect on Jan. 1, 2019, but give subject employers until Jan. 1, 2020 or 2021 to provide the initial training. Subject employers include hotels, motels, intercity passenger rail stations, light rail stations and bus stations.

Under existing law, these and other employers must also post notices about human trafficking in multiple languages.     

Training to Combat Human Trafficking

Highlights of Training to Combat Human Trafficking

  • Two new California laws require certain employers to provide training on human trafficking to their employees. 
  • The new training requirements apply to hotels, motels and employers that operate intercity rail or bus stations. 
  • These and many other employers, businesses and establishments must also post notices on human trafficking.

Important Dates

January 1, 2020

Training deadline for hotel and motel employees who were hired prior to July 1, 2019 (others must be trained within six months of hire).  

January 1, 2021

Training deadline for intercity rail and bus station employees.

Training to Combat Human Trafficking

What Are Your Action Steps?

Hotels and motels in California should become familiar with SB 970, ensure that their existing employees receive the required training by Jan. 1, 2020, and ensure that any new employees receive the training within in six months of hire.

Employers who operate rail or bus stations in California should become familiar with AB 2034 and ensure that their employees receive the required training by Jan. 1, 2021.

Training Requirements for Hotel and Motel Employees to Combat Human Trafficking

As of Jan. 1, 2019, every hotel and motel (other than bed-and-breakfast inns) that has five or more employees in California must provide classroom or other interactive training and education regarding human trafficking awareness. This training is required for all employees who are likely to interact or come into contact with victims of human trafficking. These include any employees who have recurring interactions with the public, such as those who work in a reception area, perform housekeeping duties, help customers in moving their possessions or drive customers.

Any such, employees who were hired before July 1, 2019, must receive the required training by Jan. 1, 2020. Those hired after July 1, 2019, must receive the training within six months of hire. Each of these employees must also repeat the training at least once every two years.

Training to Combat Human Trafficking Program Requirements

The human trafficking awareness training and education program for hotel and motel employees must be at least 20 minutes long and include, at minimum, the following:

  • The definition of human trafficking and commercial exploitation of children;
  • Guidance on how to identify individuals who are most at risk for human trafficking;
  • The difference between labor and sex trafficking specific to the hotel sector;
  • Guidance on the role of hospitality employees in reporting and responding to this issue; and
  • The contact information of appropriate agencies, including, but not limited to, the National Human Trafficking Hotline toll-free telephone number (1-888-373-7888) and text line (233733), and the telephone numbers of the appropriate local law enforcement agencies.

The program may also include materials and information provided by the California Department of Justice, the Blue Campaign of the federal Department of Homeland Security, and private nonprofit organizations that represent the interests of victims of human trafficking.

Enforcement

If a hotel or motel fails to comply with these new training requirements, the California Department of Fair Employment and Housing may seek a court order requiring compliance.

Training to Combat Human Trafficking

Training Requirements for Intercity Rail and Bus Station Employees

On or before Jan. 1, 2021, every business or other establishment that operates an intercity passenger-rail station, an intercity light-rail station or a bus station in California (regardless of the number of employees) must provide training on how to recognize the signs of human trafficking and how to report those signs to the appropriate law enforcement agency. This training is required for all employees who may interact with or come into contact with a victim of human trafficking or are likely to receive, in the course of their employment, a report from another employee about suspected human trafficking. Each of these employees, whether existing or new, must receive the required training on or before Jan. 1, 2021.

Program Requirements

The training program for intercity passenger- or light-rail and bus station employees must be at least 20 minutes long and include, at minimum, the following:

  • The definition of human trafficking, including sex trafficking and labor trafficking;
  • Myths and misconceptions about human trafficking;
  • Physical and mental signs to be aware of that may indicate that human trafficking is occurring;
  • Guidance on how to identify individuals who are most at risk for human trafficking;
  • Guidance on how to report human trafficking, including, but not limited to, the national hotline (1-888-373-7888 and text line 233733) and contact information for local law enforcement agencies that an employee may use to make a confidential report; and
  • Protocols for reporting human trafficking when on the job.

The training program may also include information and material utilized in training Santa Clara County Valley Transit Authority employees, the California Department of Justice and private nonprofit organizations that represent the interests of human trafficking victims.

Enforcement

An intercity rail or bus station that fails to comply with the new training requirements may be subject to civil penalties of $500 for a first offense and $1,000 for each subsequent offense.

Posting Requirements for Various Employers

Since 2013, California law has required various businesses and other establishments to post a notice regarding human trafficking in a conspicuous place near the public entrance of the establishment or in another conspicuous location in clear view of the public and employees, where similar notices are customarily posted. As of Jan. 1, 2018, this requirement applies to all:

  • On-sale general public premises licensees under the California Alcoholic Beverage Control Act;
  • Adult or sexually oriented businesses;
  • Primary airports (as defined by federal law);
  • Intercity passenger rail or light rail stations;
  • Bus stations;
  • Truck stops (defined as privately owned and operated facilities that that provide food, fuel, shower or other sanitary facilities, and lawful overnight truck parking);
  • Emergency rooms within general acute care hospitals;
  • Urgent care centers;
  • Farm labor contractors;
  • Privately operated job recruitment centers;
  • Roadside rest areas;
  • Certain businesses or establishments that offer massage or bodywork services for compensation; and
  • Hotels, motels and bed-and-breakfast inns (other than personal residences).

These employers may use the California Department of Justice’s model notice or another notice that meets the requirements outlined in the law. Specifically, the law requires each notice to be at least 8 ½ inches by 11 inches in size and written in a 16-point font and to include the following statement:

If you or someone you know is being forced to engage in any activity and cannot leave—whether it is commercial sex, housework, farm work, construction, factory, retail, or restaurant work, or any other activity—text 233-733 (Be Free) or call the National Human Trafficking Hotline at 1-888-373-7888 or the California Coalition to Abolish Slavery and Trafficking (CAST) at 1-888-KEY-2-FRE(EDOM) or 1-888-539-2373 to access help and services.

Victims of slavery and human trafficking are protected under United States and California law. The hotlines are: available 24 hours a day, 7 days a week, toll-free, operated by a nonprofit nongovernmental organization, anonymous and confidential, accessible in more than 160 languages, and able to provide help, referral to services, training, and general information.

Finally, the notice must be posted not only in English, but also in Spanish and, if applicable, one other language that is the most widely spoken language in the county where the establishment is located and for which translation is mandated by the federal Voting Rights Act.  

Enforcement

An entity that fails to post the notice as required may be subject to civil penalties of $500 for a first offense and $1,000 for each subsequent offense.

GDI Insurance Agency, Inc.

California’s Leader in Insurance and Risk Management

As one of the fastest growing agencies in California, GDI Insurance Agency, Inc. is able to provide its clients with the latest and greatest of what the insurance industry has to offer and much, much more.

We are headquartered in Turlock, CA, with locations across the heart of California’s Central Valley, Northern California and beyond to provide a local feel to the solutions and services we provide our clients. We pride ourselves on exceeding our client’s expectations in every interaction to make sure that our client’s know how much we value and appreciate their business. Contact us today 1-209-634-2929 for your comprehensive insurance quote!

Protecting Vacant Real Estate Property

Protecting Vacant Real Estate Property

Protecting Vacant Real Estate Property

The insurance risks and liabilities associated with owning vacant real estate can be extensive, and to ensure you are adequately protected, it is important to know these risks. In addition to purchasing comprehensive insurance coverage, there are numerous preventive strategies for maintaining vacant properties to reduce risk and liability.

apartment and condo loss prevention

Potential Risks of Vacant Real Estate

There are a host of risks and concerns associated with owning vacant real estate. Vacant buildings are an obvious target for theft, trespassing and vandalism. For example, the rising cost of copper has given rise to an increase in the theft of copper pipes from vacant properties. In addition to any loss or property damage that may occur, keep in mind that the owner of a property can be held liable for criminal activities or accidents that take place on the premises.

In addition, vacant properties are susceptible to undetected damages, such as fire, water damage, electrical explosions, wind or hail damage, and mold. A study by the U.S. Fire Administration shows that approximately 30,000 fires occur every year in vacant buildings, costing $900 million annually in direct property damage. Many of these incidents occur in vacant buildings due to small, undetected maintenance issues; someone in an occupied building would have recognized and handled the problem before it caused a larger loss.

In certain facilities, there may also be environmental hazards that the owner needs to consider. Facilities that are used to store chemicals or other pollutants should ensure that such materials are removed or securely stored—the owner may be held liable for any hazardous materials that contaminate groundwater or other nearby natural resources. Also, underground fuel tanks present serious challenges and thus should be frequently and carefully inspected by professionals.

Other Ways to Mitigate Risk for Vacant Real Estate

In addition to extending coverage, there are some simple steps that owners of vacant property can take to limit their risk and liability.

Prevent vandalism: Notify local authorities of vacated properties so they can watch for criminal behavior. Maintain an “occupied” appearance to the property—mow the lawn, have mail forwarded or picked up regularly and install light timers and/or a security system.

Limit liability: Make sure the property is free from significant hazards (e.g., broken railings or steps, broken windows) that could cause injuries to anyone on the property—this could include police officers, maintenance workers, firefighters or even trespassers.

Avoid damage: Performing regular maintenance on the property can decrease the odds of sustaining damage. Make sure the heating system and chimney are cleaned and inspected regularly. Have the plumbing system winterized to prevent frozen pipes. Periodically inspect roof, insulation, attic, basement, gutters and other areas of the property for any necessary repairs, mold, damage or other problems. Consider installing smoke detectors that are tied to a centrally monitored fire alarm system so the fire department will be notified in the case of an alarm. Remove all access material and combustibles from in and around the building.

vacant real estate

Insuring Residential Properties

Most insurance companies include a clause that the homeowner’s insurance will expire if a home is left vacant for more than 30 or 60 days. This leaves the property owner financially vulnerable for all previously noted risk. However, many insurance companies do offer vacant property insurance, also known as vacant building insurance or vacant dwelling insurance.

Unoccupied Commercial Building Insurance

Vacant commercial buildings are more difficult to insure because they present greater risks, including in It is important to disclose all relevant facts when seeking insurance, including the reason for the property’s vacancy and a schedule of any work to be done on the property.

Because of the increased risks and liability associated with a vacant property, these types of insurance tend to be costly—ranging from one and a half to five times the cost of a property insurance policy. It is important to look beyond the price and consider the suitability and comprehensiveness of the coverage being purchased.

For more information about vacant property insurance and other strategies to help protect your assets and mitigate loss, contact us today at 209-634-2929.

GDI Insurance

California’s Leader in Insurance and Risk Management

As one of the fastest growing agencies in California, GDI Insurance Agency, Inc. is able to provide its clients with the latest and greatest of what the insurance industry has to offer and much, much more.

We are headquartered in Turlock, CA, with locations across the heart of California’s Central Valley, Northern California and beyond to provide a local feel to the solutions and services we provide our clients. We pride ourselves on exceeding our client’s expectations in every interaction to make sure that our client’s know how much we value and appreciate their business. Contact us today 1-209-634-2929 for your comprehensive habitational insurance quote!

Understanding Your Commercial Property Insurance Rating

Understanding Your Commercial Property Insurance Rating

Understanding Commercial Property Insurance Rating

Understanding the outside factors that impact your commercial property insurance can be complicated, particularly for those with little to no knowledge of what goes into the underwriting process. While the type of business you’re in, your location and the state of the insurance industry in general can all affect commercial property coverage pricing, there’s often more to it than that. Because commercial property insurance rating can be complex, it’s important to have an experienced insurance broker. GDI Insurance Agency, Inc. can help, call us today 209-634-2929.

Commercial Property Insurance

In fact, when it comes to underwriting and rating commercial property insurance, insurers examine four key characteristics of a building: its construction, occupancy, protection and exposure (COPE). Together, these factors can affect commercial property policy pricing—pricing that can fluctuate drastically following an Insurance Services Office (ISO) inspection. This is especially true if there’s a discrepancy between what’s on an insurance application versus what’s found during an ISO inspection.

This Coverage Insights examines each aspect of COPE and how it can affect an organization’s commercial property insurance rating and, subsequently, their insurance rates.

The Types of Commercial Property Insurance Rating

Before looking at the specific factors of COPE, it’s important to understand when it is used and how underwriters rate property in general. When rating property insurance, insurers will generally use one of two methods—class rating or specific rating:

  1. Class rating—For the class rating method, buildings with similar characteristics are assigned to the same class. Insurance rates for class rating buildings will often be an average of all those in a particular group, with some rates fluctuating based on positive or negative features of a specific structure. Typically, your building will be assigned a class rating if it has all of the following characteristics:
    1. It consists of 25,000 square feet or less
    1. It doesn’t contain a sprinkler system
    1. It is not fire-resistive
    1. It is not used for manufacturing
  2. Specific rating—In instances where a building doesn’t fall under the class rating method, a specific rating will be calculated based on individual characteristics of the structure itself. This is where COPE comes in. Specific ratings are used for more complex buildings and take into account unique features—features that are examined closely during an ISO inspection. Following the inspection, ISO or the insurer will calculate a specific rate.
Commercial Property Insurance

Construction of Property

With a general understanding of the two rating systems, we can now examine how a building’s characteristics under COPE can affect policy pricing.

The first and most basic element of a commercial property insurance rating is a building’s construction (i.e., the materials the building is made of). Based on an ISO-developed system, insurers categorize buildings into one of six classes. These classes not only take into account the building materials used in construction (e.g., wood and concrete), but the combustibility of those materials as well.

These classes—numbered in order of combustibility, with Class 1 being the most likely to burn—are as follows:

  1. Class 1 (Frame)—Buildings generally receive this classification if their exterior walls are made of wood or some other combustible material.
  2. Class 2 (Joisted Masonry)—Buildings in this classification typically have noncombustible exterior walls consisting of concrete block, stone, brick adobe or another masonry material. In addition, Class 2 buildings usually have combustible floors and roofs.
  3. Class 3 (Noncombustible)—Class 3 buildings will have exterior walls, floors and roofs made of and supported by noncombustible or slow-burning materials. This can include materials like metal, asbestos or gypsum. Often, Class 3 buildings are equipped with steel frames.
  4. Class 4 (Masonry Noncombustible)—Class 4 buildings will often have exterior walls made of brick, concrete block or another type of masonry. Unlike Class 2 buildings, the floor and roof are constructed of metal or another noncombustible material.
  5. Class 5 (Modified Fire-resistive)—The walls, floor and roof of Class 5 buildings will have a fire rating of at least two hours. Because these buildings are heavily fire resistant, Class 5 buildings generally have walls, roofs and floors made of solid masonry that are at least 4 inches thick.
  6. Class 6 (Fire Resistive)—Similar to Class 5 buildings, the walls, floor and roof of Class 6 buildings will have a fire rating of at least two hours. In addition, the walls, floor and roof will consist of reinforced concrete and will be 4 inches thick or more. What’s more, structural steel used in Class 6 buildings will be load bearing and have a fire rating of at least two hours.

Following an ISO inspection, your building may be assigned a specific class, which could substantially impact your rates.

commercial property insurance

Occupancy

The second factor in COPE that insurers look at is occupancy. Specifically, underwriters will examine how a particular building is used (e.g., for retailing, manufacturing or renting).

In addition, underwriters are interested in the contents of a building and how those contents impact combustibility. For example, if a building is used as a grain mill, it will likely contain dust that could ignite or explode. With this in mind, your commercial property insurance rates will vary depending on the type of work you perform in your building.

Protection

The third factor of COPE relates to protection and the methods used to safeguard a building from fire. When it comes to protection, insurers will take into account both public and private protection:

  • Public protection—In general, public protection is provided by local fire departments, and an ISO-developed system is used to rate the quality of that protection. Under this system, fire departments are assigned what’s called a Public Protection Class rating—numbered one to 10, with one being the best. Essentially, buildings located in communities with low Public Protection Class ratings will be charged a lower commercial property insurance rate. These ratings take into account:
    • The caliber of the fire department
    • The adequacy of the water supply
    • The effectiveness of the fire alarm and communication system
  • Private protection—Private protection refers to the policyholder’s fire protection methods. This can include things like fire doors, fire alarms, fire extinguishers and sprinkler systems. Essentially, the more of these features your building has, the more likely your insurer will apply a credit to your insurance rate.

Exposure

The fourth and final factor of COPE refers to exposure. Exposure relates to external hazards that exist primarily due to a building’s location. This can include natural hazards (e.g., wind, hail and lightning) or man-made hazards from local infrastructure (e.g., highways) or the general public (e.g., high-crime areas).

The closer your building is to a natural or man-made hazard, the more likely you are to pay higher prices for commercial property insurance.

What This Means for Your Commercial Property

Commercial property insurance rates are anything but static, and a variety of outside factors can influence pricing. Despite this, you aren’t alone when it comes to managing your risks and gaining insight into your unique policies. We’re here to help.

Contact GDI Insurance Agency, Inc. today to learn more and speak to a qualified insurance broker.

GDI Insurance Agency, Inc.

California’s Leader in Insurance and Risk Management

As one of the fastest growing agencies in California, GDI Insurance Agency, Inc. is able to provide its clients with the latest and greatest of what the insurance industry has to offer and much, much more.

We are headquartered in Turlock, CA, with locations across the heart of California’s Central Valley, Northern California and beyond to provide a local feel to the solutions and services we provide our clients. We pride ourselves on exceeding our client’s expectations in every interaction to make sure that our client’s know how much we value and appreciate their business. Contact us today 1-209-634-2929 for your comprehensive commercial property insurance quote!