No two buildings are exactly the same. And no two building owners are the same, for that matter. That’s why one-size-fits-all policies usually don’t fit anyone very well.
Standard building insurance policies make certain assumptions about coverage. For instance, a standard policy may automatically include contents coverage equal to 50% of the building value, $300K in contents for a $600K building. Most people, however, don’t have 50% of their home value in contents. As a result, they end up overpaying for more insurance than they need because of a predetermined formula.
When looking for a building insurance policy, here are some of the coverages to keep in mind:
- Contents. As mentioned above, a standard building insurance policy may automatically include a specific percentage of the building value in contents coverage. Creating a home inventory will help determine how much contents coverage is needed. (This document will also make life easier in the event of a claim.)
- Liability. An important coverage for apartment buildings, liability protects building owners from lawsuits that might arise from injury or property damage.
- Loss of rents. If the building becomes uninhabitable because of a fire or storm, for instance, this protection will replace lost rental income for up to one year.
- Water backup. This option protection covers property damage caused by sewage backup through drain pipes, which can result from issues with the city sanitary main or tree roots.
- Water damage legal liability. This special coverage protects building owners against third-party water damage claims. For instance, a pipe breaks and causes water damage to the building next door.
- Ordinance or law coverage. When filing a claim, this coverage pays for additional expenses required to make a building comply with current construction codes.
- Flood. Damage from flood is not covered under standard building insurance and requires a separate policy from the federal government’s National Flood Insurance Program (NFIP).
- Earthquake. Similar to flood coverage, protection against damage from earthquakes requires a special rider.
In addition, raising the deductible is an easy way to lower the premium. The savings can be used to self-insure any small claims.
Now, owners of one- to four-unit residential buildings in New York City can design their own custom policy with A-rated insurance companies, approved by all major banks.