Most real estate investors know the importance of purchasing insurance for their commercial property. The common risks they protect against are liability for slip and fall incidents and damage caused by fire or other hazards. However, there are other key factors to consider when shopping for and reviewing insurance policies for your commercial real estate investment.
A. Proper Valuation- Often investors end up paying more on premiums because their policies insure the property up to the resell value rather than replacement value. The replacement value is the cost to repair or replace the property at the time of the loss by using like kind and quality materials. It is not the market value of the property. In determining the replacement value of your property, industry standards are used such as construction class, square footage, year built etc… Be sure to insure your property to its proper replacement value. Insurance companies will never give you more to repair or replace the property than the replacement value at the time of a loss, so it doesn’t make sense to insure to an inflated market value.
B. Flood Insurance- If your property is in New York City, insuring it against flood damage may not be at the forefront of your mind. However, with the numerous water main breaks throughout the City in the past five years, insuring against flood damage is key to protecting your investment. Remember, a flood can be caused by sources other than coastal waters and rivers. Water main breaks are more common than you might think, and the cost to repair or replace damaged floors, walls and carpets, as well as the cost of mold remediation, can be quite expensive. Flood coverage is not [read more...]
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