April 23, 2019
Contributing Author: Mark Rogina, CPCU
One of the most misunderstood topics I frequently field questions for is the insurance premium audit. Most business owners tend to not understand the reason for their premium audits and the process often appears to be convoluted at best. Premium audit issues can be costly to businesses and certainly are unexpected surprises detrimental to cash flow.
There are two major insurance coverages that most business owners will have purchased that are usually auditable: general liability insurance and worker’s compensation insurance.
Each of the respective policies are priced based on class codes, or descriptions of what it is the business does or what their employees do for the business. Multiple class codes can be used on one policy. Each class code comes with a rate, and what is known as an “exposure basis”. Depending on the type of business, an exposure basis is either payroll, revenue, building SQFT, number of units, etc. In its simplest terms, the exposures basis is divided by 100 for a worker’s compensation policy or 1,000 for a general liability policy and then multiplied by the predetermined rate to develop an insurance premium.
Continue reading I Owe More Insurance Premium?!
February 14, 2019
Contributing Author: Mark Rogina, CPCU
Commercial property owners who lease out their buildings to others have multiple choices when designing the lease. Even after the lease is designed, further consideration must be taken to determine the execution of the designed lease.
In the event a commercial property owner has chosen to utilize a triple net lease with their tenant, the next choice to be made is how to handle taxes, maintenance, and insurance costs. The landlord has two options: 1) purchase their own insurance and pass through the cost of the policy to the tenant or 2) to allow the tenant to purchase their insurance directly.
The advantages to allowing a tenant to purchase commercial insurance for the property directly include:
Continue reading Insurance Implications to the Triple Net Lease
December 13, 2018
Water can cause some of the most extensive damage to commercial buildings. Knowing this, many business owners would like coverage in the event that their building is damaged by water. However, business owners would be surprised to learn that most commercial policies do not provide coverage for water/sewer backup or for traditional flooding. Sometimes these coverages can be provided by endorsement to the commercial property policy, while other times a separate policy will need to be purchased to provide coverage.
To begin, it’s important to define the terms and understand the difference between the two causes of loss:
Continue reading Flood Insurance Vs. Water Backup Coverage
November 14, 2018
Ordinance and law coverage (O&L), might be one of the single most important coverages a building owner can have in their commercial insurance portfolio, and surprisingly, most have never heard of it. O&L coverage provides for the loss caused by enforcement of city ordinances as they relate to buildings after a loss.
The coverage comes in three parts, referred to as either part A, B, or C:
- Loss to the undamaged portion of the building
- Demolition cost
- Increased cost of construction
Continue reading Ordinance and Law Coverage and its importance to commercial building owners
October 17, 2018
Contributing Author: Mark Rogina, CPCU / Wirtz Insurance Agency, Inc.
You’ve just purchased a new piece of commercial real estate. When it comes time to insure it, your insurance agent provides you with a commercial insurance quote in which the building replacement value is much higher than you actually paid for it. Since you invested a lesser amount into it, why would you insure it for more? You only want to be covered for what you actually paid for the piece of property.
Unfortunately, this is a scenario that plays out all too often. The market value of property ends up being far less than what it actually might cost to rebuild the building from the ground up. To understand this fully, it is important to define some key terms:
Market Value – the cost to purchase a property
Replacement Cost – the cost to rebuild a property using today’s construction methods and materials Continue reading Insuring to “Value” & Coinsurance Clause