Rising Insurance Deductibles Impact On Commercial Properties This Winter

Winter brings unique challenges to commercial property owners and managers, from freezing temperatures to the risk of ice damage, snow buildup, and even burst pipes. While most property managers are prepared to address these risks operationally, a growing concern in recent years has been the rising trend in insurance deductibles a shift that could significantly impact your bottom line during an emergency. Recent trends indicate that commercial property insurance premiums have been rising with an average increase of 20.4%.(1)

Why Are Deductibles Increasing?

Insurance companies have been adjusting policies in response to the increasing frequency and severity of natural disasters, including hurricanes, floods, and winter storms. This trend has resulted in higher deductibles, particularly for commercial property policies. Instead of fixed amounts, deductibles are increasingly tied to a percentage of the property’s insured value meaning higher costs for you in the event of a claim. These hazards can result in significant financial burdens, especially when coupled with higher insurance deductibles.

The Risks for Winter

Winter weather is unpredictable, and the associated damages can be extensive and expensive. Common winter claims include:

• Frozen Pipes and Water Damage – Low temperatures can cause pipes to freeze and burst, leading to costly water damage to walls, flooring, and electrical systems.

• Roof Damage from Snow or Ice – Heavy snow and ice accumulation can weaken roofs and gutters, leading to leaks or structural issues.

• Slip-and-Fall Liability – Icy walkways and parking lots increase the risk of accidents, leading to potential liability claims.

• Power Outages and Equipment Failures – Harsh conditions can cause power outages, leading to disruptions in business operations and damage to equipment or inventory.

How Higher Deductibles Impact Your Business

While property insurance provides a safety net, the rising cost of deductibles means property managers now face greater financial exposure before coverage kicks in. For example:

• A $10 million property insured with a 2% deductible now requires you to pay $200,000 out-of-pocket for a claim.
• Even moderate damage from a burst pipe or ice storm could result in significant, unplanned expenses during an already busy winter season.

Strategies to Mitigate Your Risk This Winter

Given these challenges, preparation is critical to minimize risk and avoid unexpected costs. Here are some steps you can take:

• Review Your Insurance Policy – Work with your broker to understand your policy’s current deductible structure and assess how it aligns with your property’s risk profile.
• Invest in Preventative Maintenance – Winterize your property by insulating pipes, servicing HVAC systems, and inspecting roofs and drainage systems for vulnerabilities.
• Develop a Disaster Response Plan – Partner with a reliable restoration company to ensure you have immediate access to experts who can mitigate damage and reduce downtime.
• Budget for Higher Out-of-Pocket Costs – Adjust your budget to account for the potential out-of-pocket expenses related to claims during winter storms.
• Consider Risk Management Services – Many companies, such as BMS CAT, offer tailored disaster recovery and prevention programs, providing an extra layer of protection for your properties.

Protecting Your Property and Your Business

The rising cost of insurance deductibles is a reality that commercial property managers must address proactively. By preparing your property for winter weather and understanding the financial implications of higher deductibles, you can protect your investment and ensure the smooth operation of your business even when winter delivers its worst.

For more information about disaster recovery and risk management services, don’t hesitate to reach out to us at 877.730.1948 or fill out our form to request a meeting.

Citations:

(1)Horst Insurance. 2024 Commercial Property Insurance Market Outlook. February 2024. [Accessed December 3, 2024]. Available at: https://www.horstinsurance.com/wp-content/uploads/2024/02/2024-Commercial-Property-Insurance-Market-Outlook.pdf