MIAMI—How would you know if you were underinsured? With hurricane season gearing up, now is a good time to consider whether you have the proper insurance coverages on your commercial real estate assets.
GlobeSt.com caught up with Evan Seacat, a director for Franklin Street Insurance Services, to talk about this and other insurance concerns you may need to rethink in part two of this exclusive interview. You can still read part one: What 2014′s Hurricanes Could Cost You.
GlobeSt.com: How do property owners know if they are underinsured?
Seacat: Property values suffered during the recession, but they are recovering. If you’re not insured to the correct value at the time of loss, an insurance carrier can deny your claim or penalize you for being underinsured. You, nor your lender, will be happy.
The remedy: Look at your current cost per square foot. If the figure is more than $130 per square foot, it’s probably time to order a new appraisal. We are seeing concrete buildings that qualify as fire resistive being appraised for $95 to $100 per square foot and wood-roof buildings in the $80 to $90 square-foot range. That’s probably too low.
GlobeSt.com: Do commercial real estate owners need to pay attention to construction records?
Seacat: Get your facts wrong, and your insurance company could deny your claim. You’d be surprised to learn that we regularly find buildings listed as having floors and roofs made of combustible materials and having concealed spaces as being fire resistive.
We have found that about one in every 10 properties is rated incorrectly. You can save money today on your premium by having a higher rating on your building than it deserves, but when a major storm hits, expect the insurance company to penalize you for providing inaccurate information when you applied for coverage.
GlobeSt.com: How do I know what the right deductible is for my property?
Seacat: Most property owners look for a low deductible so the insurance carrier bears the brunt of the cost of repairing a building damaged by a hurricane. However, that low figure comes with a higher premium.
If you are looking for savings today, consider increasing your hurricane other peril deductibles. Be sure to consult your lender; they may want to weigh in on how much risk they’re comfortable with you assuming.