Chances are your office rent increased this year by a lot. Or perhaps your property insurance premium increase made you fall out of your chair when you saw that it will jump by anywhere from 20 to 300 percent. If these scenarios don't apply to you, you're lucky. You're in a minority.
Business property owners and tenants all over the country are feeling the pinch. Insurance companies are paying huge claims to companies and victims of the Sept. 11 terrorist attacks and were obviously unprepared. The National Association of Independent Insurers estimates the tragedy will cost insurers $30 billion to $50 billion. Premiums will also increase thanks to an increased threat of terrorism and greater risk assumed by insurers.
"Insurance companies have been particularly devastated by the disaster," says David Browning, Managing Director of CB Richard Ellis in Cleveland. "Tenants are going to feel that ripple effect over the next three to 12 months."
As a tenant, there are steps you can take to avoid a big rent increase. Property owners and landlords are particularly eager in Northeast Ohio to hold on to tenants thanks to a high vacancy rates across the region. Browning says to negotiate with your landlord or building manager for improvements to your space in exchange for the rent increase.
If you're a building owner, the top recommendation to avoid a huge property insurance rate increase is to increase your deductible, says Brad Norrick, senior vice president and manager of the risk management department for Marsh USA Inc. in
There are other, more risky, insurance cost-cutting strategies, but Norrick would only recommend them for the truly cash-strapped business owner.
"If it's the difference between a business owner going out of business or staying in business, he or she can buy these more restrictive approaches to coverage," Norrick says.
- Purchase coverage on the actual market value of the property instead of the replacement cost. It's cheaper for the insurer to give you the market value for the building, rather than replace it, especially if it's an older building.
- For multiple property owners, choose a blanket limit of coverage for all your property rather than buying coverage that would allow you to replace only one building. It's rare in this part of the country for an entire company's multiple properties to be wiped out at once, so there's less risk for the insurer.
- Opt for more restrictive coverage that would only protect your property against fire-only, or tornado-only instead of more inclusive coverage which would cover multiple disasters.
How to reach: CB Richard Ellis Inc., (216) 687-1800; Marsh USA Inc., (216) 937-1700.
Morgan Lewis Jr. (email@example.com) is senior reporter at SBN Magazine.