7 Tips in Insuring Retail and Commercial Real Estate

Perhaps the most important tip you may receive about retail and commercial real estate is that if you own a commercial property, you need to have it insured. This idea goes as far back as the Great Fire of London in 1666. That disaster destroyed 13,00o private homes and burned down virtually all the civic buildings. Business centers, shops, and markets were gone as well. At the end of that particular catastrophe, only 20% of London was left standing.

But fire is not the only risk to your property. There are also other natural disasters including storms, floods, and even earthquakes. Crime can be a problem too. So if you need insurance for your home and your car, it certainly makes sense that you also insure your expensive commercial real estate.

So here are some other tips to keep in mind when you’re looking for insurance:

  1. Determine the kind of coverage you need. The kind of coverage you have to get will be determined by the kind of property you have and what your long term plans are for your property. It is best if you work with an insurance broker who’s already experienced with commercial real estate, so they already know firsthand what kind of coverage is suitable for your case.
  2. Do your research. Insurance is a field that comes with complicated issues and sometimes incomprehensible jargon. An expert can help explain to you what the various insurance concepts may mean, but you should do your own research as to what various terms mean.
  3. Compare quotes. Now that you have an idea of the coverage you need, you should then obtain quotes from various insurance companies. You can’t just go with the first quote you get, nor should you only pick the lowest quote. An insurance plan with slightly higher premiums may offer a much greater range of coverage, and that insurance company may also have a sterling reputation for service and payouts.
  4. Make sure you provide proper security for your property. These insurance companies will factor in how much security you have in place when they determine the details of your insurance policy. It’s likely that an effective security system can result in a discount on the premiums you have to pay.
  5. Also make certain that your property is monitored at all times. This makes sure that you’re promptly informed whenever an accident takes place in your property that will involve your insurance company. Without that monitor, you may fail to report an incident within a specified time period and your insurance company may then refuse to cover any damage.
  6. Have an accurate idea of what costs you will have to pay for. Aside from premiums, you also need to cover your deductible. This is the amount you have to pay for before your insurance company can pitch in. There may also be co-pay systems, in which the insurance company only pays a percentage of the costs of repairs and replacements, and you have to pay for the rest.

So let’s say your insurance policy covers up to $1 million in repairs has a $150,000 deductible. If a fire breaks out in your property, you’ll have to cover the first $150K in damages before the insurance policy kicks in. It’s also possible that in your insurance policy, the insurance companies only pay 80% or 90% of the damage and you have to cover the rest.

  1. Understand the tax situation. The insurance may be tax deductible. It’s best if you can consult an accountant on this if the whole issue confuses you.

In fact, don’t hesitate to accept professional assistance from brokers and lawyers. Commercial real estate is big business, and you’ll need all the help you can get.