Apartment Building Coverage
There are many coverages you need to get right for the claim to be covered as you expected.
You could have a great company insuring your building. If your agent didn’t include the right coverage you could be exposed. Remember you have a different expectation to secure the coverage you need than a regular consumer.
There are three options for cause of loss
- Basic Fire. This coverage is offered for buildings in need of repair and the company is not willing to offer anything more than Fire coverage until the property is repaired.
- Broad form coverage is offered if it is in better condition but not acceptable for the next level. This is offered many times when the roof needs replacement and cannot be done immediately.
- Special Form is offered on an updated building in good repair. It is the broadest form of coverage available.
The other options for coverage is Replacement Cost or Actual Cash Value.
These two options will affect a payout of a loss significantly. Actual Cash Value is the cost to repair or replace less depreciation. When you see ACV it means there will be a significant reduction in payout if the building is older.
Example you had a kitchen fire. With ACV they will estimate the original cost, then depreciate based on the age of the item. Appliances, flooring, paint etc will be covered at a reduced amount than it will cost to repair or replace.
This allows you to carry a lower limit of insurance than the full cost to replace items at the time of the loss. Should you have a total loss the full amount of the coverage will be paid.
Some Companies only offer ACV on older buildings.
Replacement Cost RC is replacement cost without a penalty for depreciation. You are required to carry the cost to rebuild new for this option. An apartment building policy that has not been endorsed will have many gaps in coverage that need to be addressed.
- For example, The policy only provides 5,000 in debris removal coverage. If you have a building burn down 5,000 is not enough. The rest comes out of pocket.
- Even if you have Full replacement cost coverage. The company will only replace what was there prior to the loss. Current building codes will require you to update to the new codes. That is additional coverage that needs to be added.
- You could have a good company but if your agent didn’t take the time to talk about these gaps its too late after the fire.
- Loss of rental income is not automatic on all policies. Should you have a loss the tenants don’t pay rent. The bank wants to be paid.
There are many things we will make sure to discuss with you to be sure your covered properly.
Remember “expect more than just less” We strive to charge less for the right coverage.