The commercial property insurance marketplace is tightening, and business owners are feeling the impact. As carriers reduce their appetite for certain risks, coverage limitations and pricing pressures are becoming more common. At Hausmann Group, our Property & Casualty Consultants are seeing this shift firsthand and helping business owners navigate the challenges with strategic guidance and deep coverage expertise.
Several key factors are influencing carriers' reduced willingness to write or renew certain commercial property risks:
- Catastrophic Losses: Events like wildfires, hurricanes, and severe storms have led to massive payouts, prompting carriers to reassess their exposure.
- Reinsurance Market Pressures: Rising reinsurance costs and stricter terms are pushing carriers to limit their own risk.
- Inflation & Construction Costs: Volatile replacement costs make it harder to accurately insure buildings, increasing the risk of underinsurance.
- Aging Properties: Buildings with older roofs, outdated systems, or deferred maintenance are now considered higher risk.
At Hausmann Group, we help business owners understand coverage in today’s market and address several key concerns:
1. Valuation Accuracy & Coinsurance Risk
Many business owners are unaware of how outdated property valuations can trigger coinsurance penalties.
- Example: A building insured for $1M but requiring $1.5M to rebuild could face a 33% penalty on a partial loss.
- Hausmann Group Solution: We recommend regular valuation reviews and often suggest Agreed Value endorsements to eliminate coinsurance exposure.
2. Form Changes – Special vs. Basic Causes of Loss
Carriers are increasingly moving away from Special Form coverage, especially in catastrophe-prone areas.
- Example: A downgrade to Basic Form may exclude water damage from accidental discharge or theft losses.
- Hausmann Group Solution: Our consultants carefully review policy forms and recommend endorsements to restore critical coverages where possible.
3. Ordinance or Law Coverage – A, B, and C Explained
Older buildings are especially vulnerable to code upgrade costs after a loss, yet this coverage is often limited or excluded.
- Example: A partial fire loss could trigger full-building code compliance, costing hundreds of thousands in uncovered expenses.
- Hausmann Group Solution: We ensure business owners have adequate limits for all three parts of Ordinance or Law coverage and explain how these apply in real-world scenarios.
Ordinance or Law coverage helps address these exposures:
- Coverage A – Undamaged Portion of the Building: Pays for the loss in value of the undamaged portion that must be demolished due to code requirements.
- Coverage B – Demolition Costs: Covers the cost to demolish the undamaged portion of the building.
- Coverage C – Increased Cost of Construction: Pays for the additional costs to rebuild or repair the property in compliance with current building codes.
4. Business Income & Extra Expense
Coverage for Business Income is under increased scrutiny, with carriers limiting indemnity periods and excluding or limiting utility service interruptions.
- Example: A business closed for 90 days may only have 30 days of coverage, leaving a significant gap.
- Hausmann Group Solution: We use detailed worksheets to calculate actual exposure and recommend appropriate limits and Extended Period of Indemnity endorsements.
In this evolving marketplace, we go beyond quoting policies to:
- Educate business owners on market trends and coverage implications.
- Conduct proactive risk assessments and renewal strategy sessions.
- Explore alternative markets, including excess carriers when needed.
The commercial property insurance landscape is changing, but with the right guidance, business owners can maintain strong protection. At Hausmann Group, our consultants combine technical expertise with a client-first approach to help business owners anticipate and navigate life’s unexpected challenges.
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