There are many things building owners can do to help them obtain lower insurance rates.
One of the most important would be to create a “building profile” for the insurance
company. Owners should be able to present their buildings in the most complimentary
and worthy way. Many factors go into determining the cost of a building’s insurance such
as construction, replacement cost, number of units, claims history, housekeeping,
occupancies, and exposures. Insurance companies look to see if a building is up to code.
The owners need to keep the property in good shape
Things to make a building look better to an insurance company include:
Hard-wired smoke detectors
Proper handrails and fire escapes
Child-safe window hardware
Sidewalks free of major cracks
Closed fire doors with proper panic hardware
Well-lit hallways and walkways
Following regulations for elevators and laundry rooms
Control of all maintenance issues
Practice good maintenance-
Do façade repairs, mold eradication, and other measures prior to
any insurance company inspections
One of the easiest ways to control costs is to raise the deductible on an insurance policy.
The deductible is the amount of money that the building owner would pay before the
insurance company would pay for any claims expense. The higher the deductible (thereby
assuming some of the risk) the lower the premium cost. The deductible should be raised
to a level that will discourage indiscriminate claims. The premium money saved can be
put into a fund to self-insure any small claims.
Safety = Savings
Make sure your risk profile includes all safety related improvements in the property such
as any alarm systems, security cameras, addition of a doorman, improved lighting, and
anything else that makes your property more appealing to an insurance underwriter who
can then apply credits for the safety measures taken.
Review your building valuations on a regular basis. The costs of labor and materials
change over time. Discuss with your insurance broker the issues of co-insurance, actual
cash value, replacement cost, and current rent rolls for loss of income exposure.
Consider all the factors in estimating the cost per square foot to rebuild the building in the
event of a loss.
Newer is Better
Advise your insurance broker of building upgrades and repairs. Upgrades to major
systems such as heating, electric, and plumbing greatly improve your risk profile and can
present your property better to the insurance company. This may lead to better pricing
and broader terms when the insurance companies offer you renewal quotes.
Use an insurance broker who is experienced and knowledgeable in the real estate field.
An independent experienced broker is not obligated to a particular insurance company
and will work hard for the client. They know the various markets and can present your
property to many insurance companies that will compete for your business. Use a broker
who will work with you 12 months a year, not one who just sends a bill at the time of the
Many times you can negotiate better rates by using one insurance company for multiple
locations, with one master policy and scheduled properties. Separate policies run the risk
of being overlooked or not getting the proper credits applied to each other. A master
policy can allow you to easily view all properties scheduled with their respective
coverages. Besides the usual property and liability insurance coverages, such extras as
loss of rents, personal injury, ordinance of law, lead, mold, excess liability, and other
exposures should be discussed with your broker.
Know the financial strength and status of your insurance carriers. Are they licensed in the
State of New York, and therefore backed by the NY State Guaranty Fund? If coverages
are layered, are the stronger companies primary (on the first layers)?
Cheaper is not always better!
Essential to controlling what you pay for insurance are two underlying beliefs…
1. Believing insurance is just a commodity
2. Not managing risk on an ongoing basis
The insurance broker and building owner partnership should work together all year to
constantly try to present the property in the best light and keep the risk profile of the
property up to date. Insurance companies show their appreciation to those risks that have
improved profiles and ongoing risk management by offering them lower rates and
policies with broader terms.
Stu Cohen has been an independent insurance broker for over 30 years. He is a member
of the Professional Insurance Agents Association, and has taught classes in various fields
of insurance. He is a member of the green building councils of New York, New Jersey,
and Connecticut. Stu has been an advisor to many groups in the real estate industry and is
often a featured speaker. He is a founding board member of a non-profit organization that
promotes volunteerism. Stu formed the City Building Owners Insurance Program, to
help building owners with their insurance needs and negotiate lower rates on their behalf.
Stu can be reached at email@example.com or call him toll-free at (877)576-5200.