Without the assistance and guidance of an experienced insurance broker, acquiring commercial property insurance may be a daunting and complex undertaking.

What are the meanings of terms and conditions, deductibles, commercial property asset management, commercial property risk management, and risk cover levels? How do you make an educated choice? It’s critical to remember that when it comes to commercial property insurance, there is no one-size-fits-all option.

A licensed property insurance specialist, such as RBS Insurance, can provide you with best-in-class commercial property insurance guidance and custom-tailored products to meet your unique needs. By utilising the services of a property insurance specialist, you may avoid the most typical errors made when purchasing commercial property insurance. In this article, we review five of the most common mistakes commercial property owners make when choosing insurance. The following points will serve as guides to aid you in making your choice.

Mistake #1: Cutting Costs

As consumers, we are compelled by the lowest price. However, while this notion may work well when purchasing groceries or household goods, it does not work well when purchasing a complex insurance policy.

Insurance is intended to provide peace of mind by ensuring that you are protected in the event of an unforeseen event. Commercial property owners frequently make the mistake of reducing their protection in order to save a few rands. Insurance offers or deals that appear to be too good to be true frequently are. Prior to purchasing insurance, conduct research and receive comparison rates. Consider the following when comparing commercial property insurance:

  •  Will the coverage provided get you back to your current state if you file a claim?
  •  Do the deductibles in the quotes match?
  •  Are the coverage stipulations the same?
  •  Is it possible that some dangers are included on one but not the other?
  •  Choose a licensed property insurance specialist that will respond to your needs and handle claims fairly and efficiently.Mistake #2: Not Considering Exclusions & Warranties

Are you aware that no two policy wordings are the same? Your insurance policy may contain dozens of pages, which can be challenging to read and comprehend. The good news is an insurance broker can review every detail with you to ensure you understand and comprehend the contents of the policy, avoiding unwanted and unnecessary issues when you need to submit a claim.

Insurance firms frequently fail to effectively address fire and specific risks (such as hail, snow, wind, hurricane, cyclone, tornado, typhoon, rain, flood, overflowing gutters, and burst water tanks, among others) and their influence on risk exposure and policy coverage. Insurance policies frequently include exclusions. These exclusions should be identified and made a part of the advising record. Generally, if the client is willing to pay an additional premium, particular exclusions can be covered. Take the time and effort to ensure that your policy covers all you wanted.

Additionally, carefully analyse the insurance company’s warranty coverage. The challenge for insurers is to swiftly identify genuine claims while remaining cautious against the risk that a buyer will instinctively look to the warranties (and hence the policy) in the event of a possible claim.

A warranty is a commitment made by the customer to the insurer, which often entails the risk’s maintenance or improvement. If you, the client, violate the warranty’s terms, your claim may be denied.

Mistake #3: Underinsuring Your Property

While it is true that underinsuring your commercial property might lower your monthly premium, this is a short-sighted approach that frequently results in a bigger capital outlay to pay repair or replacement costs.

The settlement amount of a property policy is determined by the property’s replacement value. To prevent being underinsured, have the property appraised at its current replacement value rather than its original purchase price. Among the additional expenditures to consider are VAT, demolition, and professional fees, as well as the cost of complying with governmental authorities.

While the building may be worth R10 million, insuring it for R8 million will leave you with a 20% underinsurance. Your insurance will only pay out 80% of the claim amount in the event of a total loss. We recommend performing a professional valuation every three to five years.

Mistake #4: Not Considering Loss of Rent

Typically, “Loss of Rent” is commonly an afterthought for commercial property insurance. Inadequate insurance cover is a real risk; reinstating a building following a significant loss can be substantial.

Choosing the period of indemnity to insure against the loss of rent (12/18/ 24 months, etc.) becomes more critical depending on the nature of the damage. A significant event could mean a rebuilding period of years.

The following factors should be considered when selecting the period of indemnity:

  •  The nature of the property
  •  Local municipal bylaws
  •  Local economic factors
  •  Clean up period
  •  Materials supply issues

Mistake #5: Not Considering Building Regulations

Ascertain that only trustworthy contractors are engaged. A claim may be rescinded if the structure was not constructed according to the standards specified in the design.

Failure to adhere to building regulations could have a severe impact on your insurance coverage. Drainage, guttering, and retaining walls must all be adequate to withstand the anticipated loads. Water can erode the soil mass behind retaining walls that should have seepage exits and failing to account for stormwater drainage will jeopardise insurance coverage. Make sure only reputable builders are used. A claim could be repudiated if the building was not built to design specifications.

Article credit How to avoid Commercial Property Insurance Mistakes (fanews.co.za)

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