Insurance is all about protecting your bottom line. The coverage you get is designed to help protect your business from unexpected costs that could jeopardize its future. One way to do this is by protecting the property where your business operates. Whether you’re a home-based business or operate out of a commercial space, it’s important to make sure that your property and everything inside of it are protected from various risks. Purchasing the right commercial property insurance is one of the best ways to do this.
Often when trying to choose the right insurance for your business, a main concern is cost. As a Canadian start-up, entrepreneur or small business owner, every penny counts—especially when you’re just starting out. We’d like to help you better understand some of the things that go into determining the premiums you pay for your property insurance.
What are some factors that help determine property insurance premiums?
Location, location, location!
Where your business is located can have a significant impact on the premiums you pay for property insurance. Often insurance companies will look at the number, type and average costs of claims in the neighbourhood where you’ve set up shop to determine how likely you are to make a claim and how much that claim could cost. If you’ve chosen to operate your small business out of a neighbourhood with a high prevalence of break-ins or vandalism, your premium would be higher than if you chose an area where these instances are rare. Being close to a police station, fire station or fire hydrant can also affect your premium—especially in rural areas where these resources are wider spread.
While we hope you never suffer a loss as a company, accidents can and do happen. One variable that can affect your premium is how much it would cost to replace or rebuild your property if you experience a total loss. The cost to replace a property is usually determined by its size, composition and contents. For businesses, this would include your expensive equipment and any product or stock you have on the premises. If you do any renovations, enhancements or additions to your property, this could also affect your premium. It’s important to keep your insurance company aware of changes like this to ensure you’re still getting the protection you need.
The age of the building
It may seem like common sense, but as a building gets older the likelihood of a loss increases—your premium will reflect that. Newer buildings and homes will typically have lower insurance premiums than older ones. If you do own or operate out of an older building, you may be able to reduce your premium costs by doing necessary improvements and renovations. One factor that carries quite a bit of weight is the age of your roof. Typically, insurance companies prefer your roof be no older than 20 years.
Electrical work and plumbing
Water damage is a leading cause of insurance claims in Canada accounting for nearly $140 million in damages a year. The type of plumbing in your property is a key factor in determining your property insurance premium. In older buildings, you often find galvanized or lead piping, which are known to crack, burst and leak more often than copper or plastic piping. Similarly, older homes often have older electrical work in place. For example, you could have a lower premium if your property has breakers because they pose less risk of fire than fuses. Older types of wiring can also be a red flag for insurance companies. Knob-and-tube and aluminum wiring are often found in older homes and pose a higher risk of electrical fire. How electricity flows into your property is important as well. It is typically recommended that you have a minimum flow of 100 amps or you could experience a higher risk of electrical fire.
The type of coverage you purchase
The more coverage you purchase for your property, the higher your premiums will be. Most insurance companies offer different packages that include different levels of coverage. Usually, there’s an option for “basic” or “named perils” policies that can be a little bit less expensive because they only cover losses that are specifically stated. A comprehensive policy will often cover both the building itself and everything inside (unless specifically excluded). Even with these policies, there are add-ons available such as earthquake or sewer backup that would also affect your premium. It’s important to know what isn’t covered in your policy as well. Some common uninsured perils include:
- Flooding or water damage caused by floodwater
- Damage from melting or moving snow
- Damage from intentional application of heat (e.g., from your clothes dryer or iron)
If you’re looking for property insurance for your small business, and unsure of what kind of coverage you need, try the TruShield Coverage Coach. Answer a few online questions about your business and get a free, no obligation quote. And stay tuned to this blog for more information on insurance and protecting your business from risk.
This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information. Terms, conditions and exclusions apply, see policy for details.