Building updates are becoming more and more important for insurance carriers to consider before underwriting a new risk for their portfolio. They want to know:
- How old is your roof and when was it last repaired or patched?
- When was the last time there was an update or repair to the plumbing lines?
- When was the last time there was an update or repair to the electrical systems?
The age of your roof is important because the roofs lose their warranty or fail after years of rain, snow, sun, wind, etc. We have had carriers non-renew accounts at the end of the term based on the condition/age of the roof even though there haven’t been any roof-related claims previously on that building. The insurance carriers do not want to insure something that is inevitably going to cause a claim for them; it may not be this year but it is only a matter of time before an old roof fails and they don’t want to be the ones left paying for the loss. Some carriers will actually exclude roofs or roof-related losses if they know the roof is old – this is rare but if it does occur, your broker should be advising you of this exclusion before you agree to bind the policy.
The plumbing lines are important to the carriers because certain types of pipe material that were used in pre-war buildings may not have lasted the test of time. Again, the carriers look at the age and history of this to try and determine how likely it is that claim will occur. While underwriting the account, the carrier will request loss runs or a report of the claims history on your property. If they see multiple burst pipes then they can conclude that something is wrong with the plumbing in the building and unless it is updated, it is most likely going to happen again. On the other hand, they see one large water loss and they consider it a rare occurrence. One large claim is better than a bunch of the same small reoccurring claims. Reoccurring claims indicate reoccurring problems.
Keep in mind that in both of the above situations wear and tear are very common occurrences over time. Insurance is not intended to be a warranty and will not cover wear and tear and will only cover damage that is caused by a covered peril. As such, it is crucial to maintain these in order for carriers to want to insure your property. Updating or maintaining these will reduce the likelihood of claims occurring and/or these systems failing due to wear and tear. Taking care of your building will make the insurance remarketing process will be much smoother for your broker and they will be more likely to find competitive/comprehensive policies to insure your property.