How NOT to Insure an Older Commercial Building

commercial building

It is probable that, at the time it was built, your older building met all the building code requirements at the time it was originally constructed.  In the absence of any recent renovations requiring upgrades to current building standards, it is also probable that your older building does not meet modern building standards and will not be required to meet them until such time that major restoration or renovation are made or become necessary.

Unknown to many commercial building insurance policyholders is an exclusion in their property insurance policy that allows the insurance company to refuse to pay the additional costs associated with performing required building code upgrade requirements at the time of loss.

For example, should lightning strike the older building and cause damage to a small part of the original electrical system, local building code ordinances and regulations may demand that a repair to that damage requires complete electrical re-wiring of the entire building to bring it up to the current standard.  The exclusion in the business property insurance policy that denies coverage for complying with local ordinances and building codes would allow the insurance company to pay only for the repair of the damaged wiring and leave the more expensive code upgrade expenses to the policyholder.

If you own a commercial building that is twenty or more years old, I strongly suggest that you consult with your insurance agent or broker to determine if you have (or need to purchase) an endorsement to your policy that provides for the additional expense of enforced code upgrades to protect yourself from this added and significant expense to your loss.

2 responses

  1. Hi there. I like this post; very helpful to older commercial building owners. The roof of my apartment complex is around 22 years old. So, I wonder if insurance plans will still cover my building. I know that 20 years is the common cut-off age for insurance roofs since it is the average lifespan of flat roofs and shingle roofs. If I add a new layer to the 22-year-old flat floor, will this remain uninsurable?

  2. Your insurance policy is a contract between your insurance provider and yourself. It is best for you to discuss this with your agent before you incur a loss to ensure that your contract provides you with all the coverage you want and need.

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