Do some or many insurance carriers allow deductions for water, leak and flood detection equipment?
Somewhat. They may not reimburse you for your expenses. But, by showing that you have these precautionary tools and detection equipment in place, you should receive a lower premium, as the insurance company is less likely to have to pay out a claim.
At what point does it start to make sense to start layering property coverage limits?
Usually, for larger portfolios (over $500m in replacement cost) or one with catastrophic risk, this will make sense. Insurance companies have reinsurance behind the scenes and those costs begin to go up for them. However, if you raise your deductible, you’re likely to receive a lower monthly cost. You also may be able to choose multiple carriers to save on your premium costs overall.
If my insurance appraisal shows building reconstruction costs will increase, does that mean my insurance will go up as well?
In most cases, there is a direct correlation from the cost per square foot to rebuild a facility and the cost of your insurance. So, usually, if your reconstruction estimate cost goes up, it’s likely your insurance costs will go up as well. However, don’t let this deter you from having an appraisal done because if there is a loss event, and you’re underinsured, you can be on the hook for significant costs – and possibly cause you to be unable to rebuild at all.
Is it common for a lender to allow the borrower a loss limit?
The lenders don’t like to see this because it puts their collateral at risk. Keep in mind that lenders want their collateral fully insured and want your property insured for the full amount of the loan – but you can’t do that because it includes both the property value as well as the land value. They’ll try to push higher insurance coverage – it’s up to you and your insurance broker to push back on that, so be mindful of that. A loss limit may be beneficial if you have multiple buildings in several locations and only one loss limit plan for all of these properties together, given that these properties likely won’t be involved in the same loss event.