While insurance can be extremely complicated in the world of CRE, here are 5 of the top items to know if you're an investor in the space.
- Property Valuation Accuracy: Ensure that your property is adequately valued in your insurance policy. In the event of a claim, you want to avoid underinsurance, where your coverage limits are insufficient to rebuild or repair the property to its pre-loss condition. Regularly reassess the property's value to account for market fluctuations, renovations, or improvements. See my article on COINSURANCE.
- Risk Management Practices: Implement robust risk management practices to mitigate potential losses. This includes regular property inspections, maintenance schedules, and adherence to safety codes and regulations. Insurance providers often offer discounts for properties with strong risk management protocols in place.
- Natural Disaster Coverage: Assess the property's susceptibility to natural disasters such as floods, earthquakes, hurricanes, or wildfires, depending on its location. Standard commercial property insurance may not cover certain types of natural disasters, so consider purchasing additional coverage or separate policies to mitigate these risks adequately.
- Business Interruption Insurance: Evaluate the need for business interruption insurance, which provides coverage for lost income and ongoing expenses if the property becomes temporarily uninhabitable due to a covered peril, such as fire or storm damage. This coverage can help sustain your cash flow during the restoration period and ensure continuity of operations.
- Cyber Insurance: Recognize the importance of cyber insurance in today's digital landscape. Commercial property investments often involve the use of technology for operations, tenant management, and data storage. Cyber insurance can protect against cyber threats, data breaches, and associated liabilities, helping to safeguard both your property and your tenants' sensitive information.
By focusing on these critical insurance insights, commercial property investors can better protect their assets, minimize financial risks, and maintain operational resilience in the face of unforeseen events.
If your team needs a proactive, responsive, and industry-specialized broker, reach out to my team at [email protected].
