Insurance Basics: Everything You Need to Know

Three Ways Your Location Affects Your Commercial Property Insurance Premium Rates

Commercial property insurance is a policy that safeguards a commercial property owner against losses associated with theft, fire, vandalism, extreme weather conditions, and in some cases, loss of income due to a forced closure. However, commercial property insurance rates can vary based on the insurance company you get your coverage.

Nonetheless, several factors determine the premiums rate you pay towards your commercial property insurance. One of these factors is the location of your commercial property. In most cases, property owners rarely acknowledge just how much a property's location affects the premiums they pay towards commercial property insurance.

With that said, here are three ways the location of your commercial property can affect your commercial property insurance premiums.

Crime Rates in Your Area 

Typically, a commercial property insurance policy covers against damages resulting from various criminal activities such as vandalism and arson. However, based on the level of crime in your area, commercial property insurance premiums will vary.

For instance, if your business premises is in a crime-infested neighborhood, insurance companies will deem your business as having a high risk of falling victim to the criminal activities in your area. Suppose your area has a high number of vandalisms or arson instances every month. In such a location, there is a high likelihood that your business premises will get vandalized or set ablaze at some point in time. Thus, due to the high probability of such scenarios occurring, an insurance company will usually set higher premiums on your commercial property insurance cover than for a property located in a safe and crime-free area.

Additionally, suppose your area has a low crime rate. In that case, if the crime rate suddenly or gradually rises, you can expect the insurance company to raise your insurance premiums because your premise is now at risk.

Weather Conditions in Your Area

Typically, you can ensure your commercial property against damages caused by extreme weather conditions such as floods, hurricanes, storms, hail, tornadoes, etc. However, if your area doesn't experience such conditions, you can exclude coverage for extreme weather conditions in your commercial property insurance policy.

However, suppose your city or part of the state is prone to extreme weather conditions. In that case, the amount of premium you pay towards your commercial property insurance coverage will be higher because of the included coverage against extreme weather. However, you can significantly reduce the insurance premiums by removing some of the coverage you do not require.  

For instance, if your area is not prone to floods or hail storms, you can exclude such factors from the items covered in the policy. Thus, you should only get coverage for weather conditions that frequently occur in your area to minimize your insurance premiums.

Proximity to Fire Services

A fire can quickly destroy your commercial property leaving you with nothing but a pile of ash and rubble. Thus, purchasing insurance against fire damage is highly recommended.

In most cases, having adequate fire safety measures in the building, such as fire alarms, water sprinklers, and fire extinguishers, will enable you to pay fewer premiums. However, the proximity of your commercial property to the fire station and fire hydrants will also affect your insurance premiums.

From an insurance company's perspective, if your building is far from a fire department station or fire hydrants, there is a chance that the fire-damaged caused will be more severe due to the limited availability of firefighting services if a fire were to start. As a result, they will set higher insurance premiums for you than for a property located within a short distance from the fire department station or that has an adequate supply of fire hydrants.

For more information on a commercial property insurance policy, contact a company near you.