Skip to main content

How Do Insurance Companies Determine The Cost To Insure A Building?

By April 30, 2013February 23rd, 2021New Jersey Insurance

Probably one of the biggest questions we get asked at our agency is how much do you insure a commercial building. Insurance Company Underwriters rely on some basic criteria to determine the cost to rebuild. This criterion is:

1. Square footage of building
2. Number of floors
3. The occupancy of a building (Office space, warehouse, retail store, etc)
4. How the building is constructed (Walls made of wood vs. masonry walls, etc)

Think for a moment about what is not being asked. There are certain assumptions that are being made, such as:

1. Your building is on a slab of concrete
2. Your building is square or rectangle
3. There are no unique construction characteristics about your building. (Example: a solar panel system on a roof, computer room air conditioning, internal balconies, etc.)

If there is something you can take away from a conversation with your agent or insurance company it is that the insurance company gives you a basic monetary amount to rebuild. Further discussion needs to take place about your building’s unique characteristics which will affect the final value.

To get a more accurate figure you should hire an outside Insurance Appraiser who will go over the fine detail about your building. Insurance Underwriters will honor an Appraiser’s report.

Do you want to talk more about this article? Give us a call at 800-272-4RUE or drop us a line here.

Scott Harrigan

About Scott Harrigan

Scott started his career in insurance in 1988 and joined Rue Insurance in 2004 as a Marketing Specialist focusing on creating effective risk financing and risk transfer programs for companies and non-profit organizations. In addition to this he is a member of the Rue Insurance educational team that provides ongoing professional development in critical insurance concepts and programs to Rue employees. About Scott | More Posts by Scott