Chase Mayhugh, SIOR, CCIM
Due to the significant surge in commercial insurance premiums and replacement valuations, many of our valued clients are encountering premium increases ranging from 50% to 150%. This has naturally sparked the question of whether it's prudent to explore alternative options such as opting for X wind insurance. At Mayhugh Commercial Management, we recognize the critical role insurance plays in safeguarding your assets. However, we also understand that the escalating premiums may lead you to question the value of insurance. Ultimately, this decision hinges on your unique risk profile.
We strongly advise that you maintain appropriate insurance coverage to protect your assets in the event of partial or total destruction, be it due to a fire, hurricane, or tornado. At the very least, we recommend carrying fire, flood, and liability insurance, as these are affordable and fundamental protections.
Before making the decision to switch to X wind insurance, we encourage you to carefully consider the following factors:
- Loan Obligations: If you have a loan on your property, it's highly unlikely that you can transition to X wind insurance. Your loan agreements likely mandate specific insurance requirements, and failing to adhere to these requirements could result in loan default, leading to significant complications.
- Property Characteristics: Evaluate your property's age, condition, and construction type. Properties with concrete construction typically offer better hurricane resistance. Assess whether your asset was built after the adoption of the Florida Building Codes in 2002. Regular maintenance, including roof upkeep, can contribute to hurricane resilience.
- Asset History: Review the history of your asset, including the number of storm events it has weathered. Consider any past insurance claims and the costs associated with them, along with the premiums and deductibles. Ask yourself if you would be able to meet those deductibles today given the updated valuations. Risk Profile: Assess your own risk profile by asking a fundamental question: If a hurricane or tornado were to completely destroy your property, do you have the means to replace it with available cash without incurring substantial financial stress for yourself and your family? This assessment is crucial when contemplating the switch to X wind insurance. To make an informed decision, it's beneficial to be well-informed about the history of named storms and tornados in your area. You can access this information from sources such as the Tornados History website and the Hurricane Tracker. If you decide to pursue wind insurance, you'll typically encounter various deductible options that can impact your premiums. Deductibles can range from 2% to 10%. Notably, premiums tend to change most significantly when you move from a 2% deductible to a 5% deductible. Surprisingly, increasing from a 5% deductible to a 10% deductible may not result in as substantial a premium reduction as one might expect. At Mayhugh Commercial, we're here to provide you with the guidance, contacts, and information you need to make informed decisions about your insurance coverage, helping you protect your investments while managing costs effectively.
