By Marc A. Cisneros Jr. CEO and co-owner CS Innovative Insurance Solutions
Getting to Know Insurance g
Learn the factors policy writers consider in commercial properties
In today’s economy, investors are looking harder for deeply dis- counted bargains. One opportunity presenting itself is commercial
property. Whether they seek a single
structure, shopping center, apartment
complex or warehouse, investors are
eager to take advantage of the bargains
presented by the new economy.
These investors also want to protect
their purchases with insurance. There
are a lot of different things insurance
companies look at when insuring commercial properties. By understanding the basics required, commercial
mortgage brokers can help make sure
their clients establish policies in a
timely manner.
1. Location
Insurance companies must know not
only the property address but also
what is around it. They typically want to
know what adjoins and abuts the property to the front, back, left and right.
Insurance companies want this information because whatever stands in
close proximity to a property could be
a potential liability.
There also could be some other hazard that could increase the insurance
risk, which the insurance company may
not be willing to accept. Make sure you
and your clients are aware of the type
of businesses surrounding the property
under consideration.
• Any combination of the above.
An insurance company also must
know the rent being charged for each
type of unit (one-bedroom, two-bed-rooms, etc.) to determine the business-income coverage for the property.
Restaurants, coffee shops, food
service and entertainment properties
present their own additional risks and
required information. For this property
type, insurance companies are concerned about fire exposure and the
number and type of patrons.
They also will want detailed information on any cooking facilities; the total
number of occupants; the type of entertainment, if any, provided; the average cost of meals; the type of drinks
being sold (include the percentage of
each type of drink sold during a specified period of time); if there will be a
happy hour; and the general hours of
operation.
2. Description
Insurance companies must know the
construction type, roof type, type of
wiring, plumbing type, the square footage and the age of the commercial
property in question.
The insurance company also must
know if there’s a sprinkler system installed. If there is, the type and number of sprinkler heads also will be
requested.
Moreover, if there are any cooking facilities on-site, the insurance company
must know about the exhaust system,
grease traps and the type of cooking facilities used — such as microwaves, fryers and stoves. In addition, information
on the type of fire-suppression system
installed at the facility should include
information about its last inspection.
You also should note the number and
location of exit signs, as well as if the
signs are illuminated and if there any
fire doors.
Illustration: Dennis Wunsch
4. Updates and remodels
If your client is planning on purchasing
a property that needs either small or
major renovations, make sure the insurance company is aware of any planned
updates or remodeling. There are several reasons for this.
Property being updated and remodeled usually will be vacant during
renovation. In addition, many of the
building materials used will be left at
the site. These issues require special
consideration.
A standard commercial policy won’t
cover the property properly during renovation. Instead, your client will likely
need a builder’s risk or a renovation-coverage policy.
After the work has been completed,
the insurance company can write a
standard property policy.
• • •
When it comes to commercial proper-
ties, mortgage brokers should know
more than just the client’s credit score.
Having an understanding of what insur-
ance companies seek — and what your
client’s intentions are for the property
— will help you make sure your client
is prepared to secure the proper insur-
ance quickly and efficiently. •
3. Intended use
How your client intends to use the com-
mercial property is just as important to
an insurance company as the location
and description of that property. Insur-
ance companies must know what type
of business is being conducted on the
property because every type of busi-
ness presents its own under writing and
rating issues.
Marc A. Cisneros Jr. is CEO and co-owner
of CS Innovative Insurance Solutions, an
independent agency in San Antonio. He
specializes in insurance programs catering
to mortgage brokers, including errors-and-omissions coverage; commercial insurance;
surety bonds; medical insurance; and home,
rental and commercial insurance for clients.
Visit www.csiis.biz or e-mail marc@csiis.biz.
