.After many
consecutive years of declining business insurance premiums,
2001-2002 saw the start of increased Apartment Building
Insurance costs. By now, most apartment building owners
have become familiar with the many reasons things changed;
steadily increasing claim costs, the Sept. 11 catastrophe
& ensuing record losses, rising expenses for insurance
companies such as increased re-insurance costs, the dramatic
reduction in investment income, and growing underwriting
losses, etc.
For 2003, rate increases of 20-30 percent
have been normal for most business owners including apartment
buildings with good claims records and relatively innocuous
liability exposures. Companies with previous losses, high
liability, etc. often face much higher increases. The
marketplace may level out somewhat in 2004 (barring any
major catastrophes) but the general opinion is that we
will still continue to experience some ongoing premium
increases, albeit somewhat lower than 2003.
With these facts in mind, prudent apartment
building owners look for ways to mitigate their increased
costs. There are many alternatives to explore in doing
this and they should all be examined to find the proper
balance between costs & benefits. While some insurance
coverages for minor exposure may even be eliminated, depending
on the individual owner’s tolerance for self-insuring,
one coverage that definitely should not be deleted is
Rental Income protection.
A tenant is cooking French fries on the
stove with a pot of oil. While the oil is heating up,
the tenant leaves the kitchen. The pot of oil bursts into
flames and quickly spreads to the cupboards over the stove.
The tenant returns to see smoke and fire in the kitchen
and quickly calls the fire department. While the physical
damage is covered under the building coverages, the loss
of income for this unit and possibly other units that
would be affected due to water damage and smoke damage
would not. This is where rental income or loss of rents
coverage would pay for the loss of income.
Yes, there are many options & alternatives
to consider that can mitigate rising business insurance
costs, but think very seriously before deleting your Rental
Income safety net.
As always, to avoid unpleasant surprises,
it’s important to work with a professional in this
area.
Ron Glasser
is the Associate Broker for Dan Lawrie Insurance Brokers
Ltd. He may be reached at 1-800-661-1518
