Ask the Expert: How do I determine the correct insurance coverage for a commercial building?
“Understanding different construction types and their replacement costs is one of the key components in determining suitable building values. We want to make sure that in the event of a claim our insured will be covered. For example, the cost to build a frame construction apartment building will be much lower than a high-rise, fire resistive tower. Geographic location and construction costs in certain areas of the country also play a huge role in determining values. Construction costs in a state like California are higher than that in Florida. Therefore, replacement cost values should be fluctuated based on their location. Many carriers have minimum replacement cost values that they require depending on the type of construction or geographic location.
Lender requirements are the biggest factor in determining the amount of insurance coverage for any given building(s). The lender provides an insured with required values, deductibles, and limits that we must obtain from the marketplace. It is our job to analyze the values and determine if they are adequate, so we are not over- or under-insuring a location.”
Franklin Street Insurance Services