Have you ever wondered how insurance companies determine the premium for a commercial property? It all depends on how likely a business is to file a claim. The greater the likelihood of a claim, the higher the premium will be.
The primary factor that usually determines a business's commercial property rates, is fire risk. 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:
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.
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 Texas Commission on Fire Protection, 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.
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.
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Thumann Agency Inc
12770 Coit Road, Suite 110, Dallas, TX 75251
Phone: (972) 991-9100 | Fax: (972) 690-1733