Understand Your Insurance Needs

It's no surprise to franchisees and franchisors that property insurance rates are increasing. According to The Council of Insurance Agents & Brokers (CIAB), commercial property premiums increased more in the first quarter of last year than they have in more than 20 years.

Inflation and natural catastrophe risk are the main drivers of premium increases in commercial property followed by supply chain issues and increasing repair costs. According to the CIAB, more than 60 percent of respondents to a recent survey reported an increase in the frequency of commercial property claims from weather events.

Owning or renting property presents unforeseen risks, and emergencies or dangerous situations can potentially result in damage to your franchise investment. Property insurance is a vital safeguard for both property owners and renters because it can help protect you from the financial downfalls of potential accidents.

The type of franchise you own—home-based, mobile, free-standing brick and mortar, or in a strip center—directly affects the type of property insurance you'll need to be fully covered. Options include homeowners or condo insurance, flood or earthquake coverage, renters or landlord insurance, and mobile home insurance.

A range of issues are often overlooked when considering property insurance and how to mitigate rising rates. Here are key factors to consider:

• Replacement cost. Be sure your property is insured to cover the cost of replacing it with a like kind and value, disregarding market cost.
• Co-insurance compliance. Verify that you have replacement cost insurance compliant with your co-insurance requirements.
• Cash value concerns. Is your property insured for replacement cost or actual cash value? We recommend staying away from actual cash value if possible.
• Plan knowledge. Pay attention to endorsements affecting property insurance and make sure you understand what your plan entails.
• Commercial property. In terms of commercial property, select an agreed value type insurance that removes the co-insurance requirements. While this may not apply to personal property, it is a common addition to commercial risk.
• Annual review. Instead of simply renewing your current insurance, have a sit-down meeting with your insurance agent to discuss the best plan for your needs.

It is important to note that complacency with property insurance can lead to being over- or underinsured, potentially resulting in affordability or limited coverage issues. Staying vigilant and well informed about your property insurance is essential to ensuring your assets are adequately protected.

Doug Groves is a principal with Program Insurance Group.