DIFFERENT TYPES OF COMMERCIAL INSURANCE

The most common types of commercial insurance are property, liability and workers’ compensation. In general, property insurance covers damages to your business property; liability insurance covers damages to third parties; and workers’ compensation insurance covers on-the-job injuries to your employees. Depending on your business, you may want additional specialized coverages. Listed below are some of the different types of business insurance.

PROPERTY INSURANCE Property insurance pays for losses and damages to real or personal property. For example, a property insurance policy would cover fire damage to your office space. You can purchase additional coverages for business property, including:

Boiler and Machinery Insurance Boiler and machinery insurance, sometimes referred to as “equipment breakdown” or “mechanical breakdown coverage,” provides coverage for the accidental breakdown of boilers, machinery, and equipment. This type of coverage usually will reimburse you for property damage and business interruption losses. For example, this coverage would cover fire damage to computers.

Debris Removal Insurance Debris removal insurance covers the cost of removing debris after a fire, flood, windstorm, etc. For example, a fire burns your building to the ground. Before you can start rebuilding, the remains of the old building have to be removed. Your property insurance will cover the costs of rebuilding, but not of removing the debris.

Builder’s Risk Insurance Builder’s risk insurance covers buildings while they are being constructed. For example, a Builder’s risk policy would cover losses if a windstorm takes down your partially constructed condominium complex.

Glass Insurance Glass insurance covers broken store windows and plate glass windows.

Inland Marine Insurance Inland marine insurance covers property in transit and other people’s property on your premises. For example, this insurance would cover fire-damage to customers’ clothing from a fire at your dry cleaning business.

Business Interruption Insurance Business interruption insurance covers lost income and expenses resulting from property damage or loss. For example, if a fire forces you to close your doors for two months, this insurance would reimburse you for salaries, taxes, rents, and net profits that would have been earned during the two-month period.

Ordinance or Law Insurance Ordinance or law insurance covers the costs associated with having to demolish and rebuild to code when your building has been partially destroyed (usually 50 percent). For example, your three-story building is 100 years old. A flood destroys the basement and first two stories. Because more than 50 percent of your building has to be rebuilt, a local ordinance requires that the building be completely demolished and rebuilt according to current building codes. Property insurance covers only the replacement value, not the upgrade.

Tenant’s Insurance Commercial leases often require tenants to carry a certain amount of insurance. A renter’s commercial policy covers damages to improvements you make to your rental space and damages to the building caused by the negligence of your employees.

Crime Insurance Crime insurance covers theft, burglary, and robbery of money, securities, stock, and fixtures from employees and outsiders.

Fidelity Bonds A bond company covers losses due to a bonded employee’s theft of business property and money.

LIABILITY INSURANCE Liability insurance covers injuries that you cause to third parties. If someone sues you for personal injuries or property damage, the cost of defending and resolving the suit would be covered by your liability insurance policy. A general liability policy will cover you for common risks, including customer injuries on your premises. More specialized varieties of liability insurance include:

Errors and Omissions Insurance Errors and omissions (“E & O”) insurance covers inadvertent mistakes or failures that cause injury to a third party. The act must actually be an inadvertent error, and not merely poor judgment or intentional acts. For example, an E & O policy would cover damages arising from an insurance agent failing to file policy applications, or a notary forgetting to fill out notarizations properly.

Malpractice Insurance Malpractice insurance, or professional liability insurance, pays for losses resulting from injuries to third parties when a professional’s conduct falls below the profession’s standard of care. For example, if a doctor makes a mistake that other doctors of his specialty would not have made, his patient might sue him. A malpractice policy will pay his defense costs and any judgment or settlement. Malpractice insurance is available for doctors, dentists, accountants, real estate agents, architects, and other professionals.

Automobile Insurance Commercial automobile policies cover the cars, vans, trucks and trailers used in your business. The coverage will reimburse you if your vehicles are damaged or stolen or if the driver injures a person or property.

Directors’ and Officers’ Liability Insurance This type of insurance is generally purchased by corporations and nonprofit organizations to cover the costs of lawsuits against directors and officers.

WORKERS’ COMPENSATION INSURANCE Workers’ compensation insurance covers you for an employee’s on-the-job injuries. Businesses with employees are required by various state laws to carry some type of workers’ compensation insurance. In most cases, workers’ compensation laws prohibit the employee from bringing a negligence lawsuit against an employer for work-related injuries.  

Source: Findlaw.com

Real-Estate Markets Still Plumb for Bottom

Have you seen the cost of other insurance?

By Anton Troianovski / Wall Street Journal

What began as a bad year for real estate turned into one of the worst on record, driven by an unprecedented drop in home prices, a tide of foreclosures and a credit crisis whose magnitude few anticipated.

“I thought it would be a bad year,” said Mark Zandi, chief economist at Moody’s Economy.com. “I didn’t think it was going to be a complete washout.”

And as bad as 2008 was, few are ready to say the worst is over. The troubles in the residential sector are expected to continue, while problems are just beginning for the other side of the real-estate market — office buildings, hotels, shopping malls and other commercial properties — as the recession starts to have an effect.

“The question on everyone’s mind is, ‘How is the government going to try to solve this?’ ” said Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.

On the residential side, many are urging the Obama administration to push for broad programs to limit foreclosures, stimulate demand for homes, and stop the slide in prices. The Treasury Department is considering a plan that would push down rates on home mortgages to 4.5%.

One of the government’s highest-profile efforts so far, Hope for Homeowners, lets banks move borrowers into government-insured loans if lenders agree to write down a portion of the principal. But very little of the $300 billion pledged by the Department of Housing and Urban Development has been put to use so far, in part because investors who hold those loans would incur big losses.

Commercial developers are also hoping for a lifeline from Washington, perhaps guaranteeing chunks of new commercial mortgages.

House prices fell 23% from their July 2006 peak to October 2008, the latest data available, based on the S&P/Case-Shiller Home Price index, which tracks home values in 20 cities. Mr. Zandi expects an additional 10% drop to a bottom late this year.

One in 10 homeowners with a mortgage is either in foreclosure or delinquent on payments, the Mortgage Bankers Association said last month.

Banks have tried loan-modification programs to stem the crisis but with limited success. More than half the mortgage loans that were modified were more than 30 days late six months later, according to a government report last month.

Regions that had been booming were hit especially hard by the bursting of the real-estate bubble. In the Southwest and Florida, homes lie vacant along the winding streets and cul-de-sacs of brand-new subdivisions.

In Phoenix, home values have fallen 41% from their peak in June 2006. “Boomers who we counted on coming down here when they retire can’t sell their homes in Chicago or Michigan or other places, so they’re not coming,” said Betsy Kurasch, a local real-estate agent with ReMax Achievers.

Wall Street is feeling the effects as well as Main Street. Securitization, the packaging of loans into investment products, had allowed new mortgages to be issued at huge volumes and helped to inflate the housing bubble. It essentially disappeared as credit markets seized up amid problems with subprime loans, with some of the biggest financial institutions in the country taking a hit. Residential-mortgage originations fell to $300 billion in the third quarter — a 50% drop from a year earlier, according to Inside Mortgage Finance, a trade publication.

For commercial real estate, the troubles that lie ahead could hurt pension funds and college endowments that moved money into real estate in recent years as the market was booming, as well as real-estate magnates.

The commercial market “is going to be ugly for the next 12 to 24 months,” said Michael Restuccia, chairman of the San Joaquin County (Calif.) Employees’ Retirement Association. “Not just bad, but ugly.”

A preview of the ugliness — as well as opportunities for investors with cash to spend — came last spring, when loans coming due forced New York property titan Harry Macklowe to sell some of his prized office towers.

It’s hard to know how far commercial-property prices have fallen because the lack of credit has made it hard to buy big buildings. In the office market, for instance, only $1 billion of deals on fewer than 50 properties closed across the U.S. in November, according to research firm Real Capital Analytics. That’s a 90% drop from November 2007.

The stock market provides clues to how investors are pricing commercial real estate, and the picture isn’t pretty. The Dow Jones Equity All REIT Index, which tracks many public real-estate company stocks, fell 40% in the last three months of 2008.

The poster child so far: Retail landlord General Growth Properties Inc., which received an extension last month on an overdue loan as it struggled to pay down its $27 billion debt load. The share price of the Chicago-based owner of more than 200 U.S. malls plunged to $1.29 from $41.18 over the course of the year.

Investors are especially concerned about sectors of the market most exposed to cutbacks in spending by consumers and corporations: shopping malls, warehouses, office buildings, and most of all, hotels, which are suffering as consumers and businesses cut spending on travel. Companies involved in health-care facilities and senior housing are considered somewhat safer, in part because of the coming wave of retiring baby boomers.

There are questions facing commercial real estate this year: How much further will real-estate stocks fall? Will property owners with debt coming due find ways to refinance? And will the investors who committed billions to commercial property in the past few years be willing and able to make good on those commitments?

“For economists now to make forecasts is a pretty difficult thing,” said Ray Torto, chief global economist at real-estate firm CB Richard Ellis. “All of our models are outside the territory in which they’ve been built.”

Retail Shopping Center Loss Prevention Program

The Retail Shopping Center Loss Prevention program is specifically designed for

building owners or managers who rent or lease, in whole or part, their buildings to

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The real estate industry is one of America’s largest and most important tangible

assets. The development, construction and growth of increasingly sophisticated

commercial businesscenters and retail centers is projected to continue well into the

future as more and improved buildings will be needed to suit the expanding needs

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investment. Whether you turn this responsibility over to a professional property

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Office-space landlords willing to bargain in tough economy

by Andrew Johnson – Nov. 20, 2008 12:00 AM – The Arizona Republic

Consumers have cut back discretionary spending. Credit is harder to obtain. Energy costs have been on a roller coaster.

Operating a small business has become something of blood sport in the past year.

But an area of the economy where small-business owners are getting breathing room is commercial real estate.

Fundamental factors that turned the Valley into a commercial-development hot zone – rampant in-migration and job growth – have slowed. Leasing and sales velocity in the commercial market has stalled. Vacancy rates for office, retail and industrial properties are at their highest levels in several years.

The news may sound dour, but the ailing market has opened new and, in some cases, classier doors for small businesses. To fill space, landlords offer a bevy of concession packages: several months of free rent, reduced parking rates, money for improvements and greater move-in flexibility.

The specials enable companies in older buildings or less-than-ideal locations to move into Class A space without necessarily paying Class A prices.

 

 

The downturn has taken a toll on businesses in all sectors. Many have scaled back hiring or postponed expansion because of skittish consumer demand. Others have gone belly up.

The result is fewer tenants available to fill the growing pool of commercial space. That has delivered a hefty blow to building owners and property managers, who struggle to attract and retain tenants.

 

Very shallow’ market

 

“The market’s very shallow right now in terms of activity,” said Don Mudd, a senior vice president in the Phoenix office of commercial-brokerage firm Grubb and Ellis/BRE Commercial LLC.

In addition to the rising number of businesses that are vacating space altogether, many are trying to sublease. Some want to sublease space they don’t need; others are looking for cheaper space elsewhere and can’t prematurely end the contract for their current location.

Subleasing is one way small-business owners can move to a premier location without paying premier prices.

“On the sublease side, there is a significant reduction of (rental) rate,” said Nicole Cooley, a senior associate with Cushman and Wakefield of Arizona Inc. in Phoenix. Cooley works with office tenants seeking 3,000 to 10,000 square feet.

Many tenants are taking advantage of the slow market by “either stepping into Class A space in a better submarket or into a more ideal location for their employee base,” she said.

Lisa Perez, who co-owns a document-shredding business, is subleasing about 500 square feet from an office-furniture company in east Phoenix. She pays about $1,200 on a month-to-month basis.

Other properties she looked at cost $3,800 to $5,000 per month.

“I thought, ‘Gosh, we’re going to burn through cash pretty quickly,’ ” recalled Perez, CEO of AZ Docushred LLC.

 

 

Flexible terms

 

Many landlords have become more accommodating to potential tenants as the commercial real-estate market has softened.

When Ultimate Shade Alternatives in Tempe was looking to relocate its office and warehouse last fall, price was important – so was space configuration and move-in time.

The company installs outdoor shades on commercial and residential properties.

The shade materials are as long as 50 feet, so the company requires large swaths of unobstructed space. The business also was growing, making it difficult to pinpoint exactly how much space it needed.

The owners decided to stay put in a multitenant office-warehouse building in Tempe. A deciding factor was a change in the building’s ownership. The new landlord’s offer to let the company move into the space during the course of several months instead of at one time helped seal the deal.

“They allowed us to utilize some of the new space before we even had an agreement, so they really were going out of their way to help us as a business manage our growth,” president Joy Whitfield said.

Tenants often focus on lease rates when they should keep an eye out for other factors that can affect the bottom line, too, said Greg Mayer, a senior associate with CB Richard Ellis in Phoenix.

“There are 40-plus points in an office lease,” said Mayer, who brokers lease agreements for office tenants. “Most people focus on rent as being the biggest point in a lease, (but) you have parking, you have operating expenses, you have insurance, you have remedies if something happens in a building.”

 

 

Staying put

 

Despite plentiful deals, other tenants are making do with what they have.

Earlier this year, John Beck was considering moving his office equipment firm, WORKspaces LLC, into a new building because the business could use more space.

The company had moved from a 1,000-square-foot Camelback Corridor office into a 4,000-square-foot multitenant building in northeast Phoenix two years ago.

“We were growing like crazy,” Beck said. “We had too many people stuffed into a small office.”

The company’s office is starting to get crowded again, but the economic downturn has Beck putting potential moving plans on the back burner.

The company could financially afford to take on a couple of thousand more square feet, especially with the some of the deals landlords are offering, he said. Still, the office-furniture business is particularly susceptible to economic downturns, and Beck doesn’t want to risk having to pay for more space than he’s going to need.

In many cases, it’s more difficult for businesses to add locations or relocate headquarters because of financing issues.

“With the tight credit markets, it’s really difficult, if not impossible, for companies to borrow on a business line of credit or (obtain) business loans,” said Thad Seligman, president of the Phoenix office for commercial brokerage firm NAI Horizon.

For some businesses, the only option is to dip into cash reserves.

“The problem is there’s so much unknown about what’s going on in the business environment that no one wants to spend their own cash,” Seligman said.

Commercial Buildings

Farmers Commercial Real Estate insurance coverage provides a comprehensive program to property owners who lease or rent building space used for offices, service businesses, retail stores, light industrial, or light manufacturing. Parking areas may be included in the coverage if used by the building occupant and customers.

We offer coverage for:

·      Office buildings

·      Retail shopping centers

·      Buildings used for manufacturing, industrial, assembly

·      Processing or service buildings

·      Private commercial warehouses

·      Mixed occupancies: office, retail, light manufacturing, industrial, assembly, processing, or service buildings

Our highly dedicated, top-tier Claims professionals are here to help you to get back where you belong. Let our Loss Control professionals work with you to help you prevent or mitigate potential losses in your business.

The Coverages

Here are some of the coverage options that are available to you to help you with your insurance needs:

Property and Inland Marine

·      Buildings at Extended Replacement Costs or Actual Cash Values

·      Automatic Increase in Building Amount (inflation guard)

·      Contents at Replacement Costs or Actual Cash Values

·      Personal Property Off Premise Coverage

·      Loss of income & extra expense on an actual loss sustained basis for 12 months or other extended period

·      Loss of income & extra expense from power interruption or from loss to dependent properties

·      Loss in value of undamaged building portion, demolition or increased construction cost to meet ordinance or law requirement

·      Comprehensive equipment breakdown coverage

·      Coverage extension to newly acquired buildings and contents

·      Fire department service charge and extinguisher recharge cost

·      Outdoor signs and outdoor properties

·      Debris removal & pollutant clean up cost

·      Back up of sewers or drains

·      Accounts Receivables and Valuable Papers coverage

·      Computer equipment including Media & Records

·      Earthquake or earthquake sprinkler leakage

·      Lock Replacement

·      Tenant Return (costs incurred to bring back displaced tenants)

Crime

·      Employee Dishonesty

·      Forgery & Alteration

·      Money & Securities – from both inside and outside the premises

·      Money Orders & Counterfeit Currency

 

General and Other Liability

·      Operations and Premise liability including parking lot liability

·      Personal and Advertising injury liability

·      Products and Completed Operations liability

·      Contractual and Owners Protective liability

·      Hired and Non-owned automobile liability

·      Employee Benefits Liability