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Understanding Commercial Property Rates. How are Commercial Property Insurance Rates Calculated?

Insurance companies use a process called underwriting to determine how likely your business is to file a claim. The greater the likelihood of a claim, the higher the premium will be. If an insurance company determines that your business is at a high risk for a loss, it may decline to issue you a policy.

Fire risk is usually the primary factor that determines a business’s commercial property rates. Insurance companies do inspections as part of the underwriting process. Fire inspectors use a standard rating system and weigh five factors to determine a structure’s fire rating. The five factors are:

Construction materials. Buildings made of potentially combustible materials will have higher premiums, while those made of fire-resistant materials could earn a discount. Additions to an existing structure might affect a fire rating, so it’s a good idea to talk to your agent or insurance company before remodeling. Internal structural elements can also affect a fire rating. Using wood partitions, floors, and stairways in an otherwise fire-resistant building will likely nullify any rate reduction. Fire-resistant interior walls, floors, and doors can help maintain a good fire rating.

Location. Buildings in cities or towns with good fire protection—as assessed by the Insurance Services Office typically cost less to insure than buildings outside a city or in areas with limited fire protection.
Occupancy. A building’s use also affects its fire rating. An office building will likely rate better than a restaurant or auto repair shop. In a building with multiple tenants, one hazardous occupant will negatively affect the fire rating of the entire building. If your business is in a building with a more hazardous tenant, your premiums will be higher.

Fire protection measures. Automatic sprinklers can reduce a building’s fire rating by as much as 50 percent. Buildings with fire extinguishers and automatic alarms and those within 500 feet of a fire hydrant will usually have lower ratings.

Exposure. Nearby hazards increase a building’s fire risk. Proximity to external fire hazards, such as a lumberyard or oil storage tank, will affect a fire rating even more. Other things that could affect your fire risk include cluttered buildings and grounds, heavy mechanical or electrical equipment, or volatile materials stored on site.

We have commercial property insurance for Alarm Installation Contractors, Architects & Engineers Professional Liability, Dealers Physical Damage, Fire Suppression & Sprinkler Contractors, Garage, Government Service Contractors, Insurance Agents’ E&O, Marine, Personal Lines, Pest Control Operators, Private Investigation, Fire, Water & Smoke Damage Clean Up, REO/Foreclosure & Lender Placed Property Insurance, Security Guards, Storage Facilities, Workers’ Compensation, Temporary Staffing, Accountant’s Professional Liability, Golf Courses, Assisted Living Facilities, Coin Laundry & Dry Cleaners, Convenience Stores, Pawn Shops, Tattoo & Body Piercing, Ice Rinks, Warehouses

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