Sprinkle on Property Insurance Savings
My business clients often ask how to save money on their property insurance. Their questions sometimes accompany a certain level of anticipation. A client will call full of excitement about the new burglar alarm system they recently installed. Will that reduce the premium?
What about a higher deductible? Installing a sprinkler system or connecting a fire detection system to a monitoring company? How much savings can you expect for these upgrades?
First, please know that commercial rating does not work like the rating of your home policy. You don’t receive a standard credit for smoke alarms, burglar alarms, or a fire detection system. An underwriter has discretion to lower or raise the property rates based upon their judgment. Their judgment can be influenced by the qualities of the individual insured as well as the need to meet their new business production goals. Unfortunately, there is no clear answer to the savings realized by installing alarms or smoke detection systems.
Higher deductibles will qualify you for a lower premium but the savings realized beyond a $1,000 deductible are minimal. A ball park savings estimate for raising a $1,000 deductible to a $5,000 deductible is 2%. It’s not a great buy and most insureds stick with the $1,000 level.
But installing a sprinkler system in your building can have a significant effect on your property rate. Sprinkler systems can save between 25 – 40% off the premium of a non-sprinklered building. Some of this depends upon the type of occupancy and construction of the building. Maintaining and testing the sprinkler system is also important for getting the proper credit.
So think about a sprinkler system if you don’t have one already.
Do you have a question on your property insurance? Reply to this email with the question, and I’ll be happy to answer it for you.