A fire in your workplace can be extremely costly. In addition to the costs associated with fixing the damages, there is also a good chance that your day-to-day business activities will be interrupted during the repairs. To avoid potential expenses related to workplace fires, it is important that you have adequate fire insurance. Fire insurance is included as part of most property insurance policies for commercial buildings. However, it is important that you understand your commercial property insurance policy to make sure it provides all the fire insurance protection you need and that you are paying the right amount in premiums.
Types of Fire Insurance Coverage
There are two primary factors that come into play when dealing with fire insurance. Make sure your coverage incorporates them both to make sure you won’t be left holding the bill.
Commercial Property Fire Insurance – This is the portion of your policy that kicks in to cover the building itself, the equipment, inventory, raw materials etc in it. When there is a loss to physical assets caused by a fire, this is what pays for replacement and repair costs.
Business Interruption or Lost Profits Fire Insurance – In the aftermath of a fire, there may be a time period where you may not be able to conduct business, often due to damaged work space. This part of your policy will cover loss of revenue during the recovery period after a fire.
Based on your fire insurance policy, these coverages will offer different levels of protection. Review your peak inventory, replacement cost of your building etc. to make sure that the amount of coverage is appropriate to your potential risks.
Fire Insurance Sprinkler System Credits
You can often reduce your premiums for fire insurance by installing a sprinkler alarm system. With some fire insurance providers offering 10-60 percent discounts, systems can quickly pay for themselves. However, to get your full fire insurance credit, you have to make sure that your system is reviewed and approved by underwriters.
According to the Insurance Services Office, Inc. (ISO), many organizations receive little to no credit on their fire insurance for having a fire sprinkler system in place. This is because the facility and the sprinkler system have not been properly inspected in order to provide full credit. Certain insurance companies will gladly inspect your facility and develop an accurate credit on your fire insurance, which will reduce your overhead costs and, in turn, increase your bottom line.
The fire sprinkler evaluation process typically consists of a review of the following areas:
- System design based on the requirements of occupancy
- Available water supply
- System installation and components
- System testing
- Inspection of areas of the building without sprinklers
- Building conditions affecting the sprinkler operation
- Necessary Testing and Certifications
The following are typically reviewed or completed before receiving a fire insurance credit:
- Main Drain Test
- Copy of the Underground and Overhead Piping Hydraulic Test Certificate
- Dry Pipe Trip Test Results (systems with dry pipe valves only)
- Fire Pump Performance Test Results (systems with fire pumps only)
- System Design Criteria Evaluation (through a review of the sprinkler plans, hydraulic calculations or hydraulic data plaque information)