When it comes to managing commercial property risks, most insurance experts agree that risk management services should be uniquely tailored to each individual client. The International Risk Management Institute defines the term as “the practice of identifying and analyzing loss exposures and taking steps to minimize the financial impact of the risks they impose.” The failure to implement a reliable asset protection strategy could cost you to pay out hundreds of thousands of dollars for bodily injuries and property damages.
Here are three vital items commercial property investors should consider when developing loss control prevention strategies.
1. Maintain accurate records
Having a proper records management system is critically important and will greatly facilitate your commercial property damage claims. As an owner, you should provide the insurance carrier with a basic property summary, which includes updated details on asset improvements, claims narratives, and a loss history report.
Choose an insurance agency that has a dedicated claims department resource to assist you with the claims filing process. We believe that the key to building an exceptional risk management partnership lies not only in the placement of insurance coverage, but also in the day-to-day oversight of claims. This oversight will help achieve your main objective, which is to reduce the frequency and severity of claims that have a direct financial impact on your bottom line.
Next, you should have a specific risk management procedure for every worst case scenario, including natural disasters. Be sure to keep all important vendor contracts in a safe place before a hurricane/disaster strikes. It is always a wise idea to have your insurance policies reviewed by a third party for accuracy and to catch any potential coverage holes.
2. Make appropriate safety and property improvements
Building managers should ensure that their properties are upgraded with fire sprinklers, impact-resistant windows and durable roofs. Taking those steps will greatly reduce the number of potential problems that are likely to occur. Also, be sure to add security measures such as cameras, perimeter fencing, locks and guards to protect your property, tenants and guests.
Slip and fall accidents are a common concern for property owners, so make certain you take safety precautions and have adequate business liability insurance coverage. Likewise, safeguard your property to address potential assault and battery/theft incidents in parking lots or retail areas.
Tenant demographics (i.e. age, sex, marital status, number of children, cars and yearly income) are another factor to consider when creating a risk management strategy. Property owners and landlords can use surveys in their tenant screening process and help protect their investment by attracting higher quality tenants.
3. Understand insurance purchase options
Commercial owners and buyers have been experiencing sticker shock when they refinance, sell or purchase properties. Insurance premiums have jumped as much as 25 percent because of the broadened insurance requirements set forth by lenders in recent years. Knowing and understanding lender requirements is a necessity when seeking coverage for natural causes of damages, such as floods, hail, hurricanes and wind.
As overall insurance requirements have become stricter, national and local proprietary programs are becoming more common and the level of interest has risen for property owners. Franklin Street is among the insurance firms that have developed proprietary master policy layered programs that can save property owners thousands of dollars both regionally and nationally while still meeting all lender requirements.
Also, ask your insurance broker to explain the difference between loss limit vs. full limit programs to know which one is right for your needs. Loss limit policies insure property on an occurrence basis to a limit of the probable maximum loss rather than an actual total property value.
Other ways to save on policy premiums include reviewing your deductible amounts, asking about policy discounts in the form of credits or reduced premiums for property upgrades, and ensuring that all insurance coverage limits are accurate.
Ryan Cassidy is a senior director with Franklin Street Insurance Services. He can be reached at [email protected]. Evan Seacat is a senior director with Franklin Street Insurance Services. He can be reached at [email protected].