Protect your house from calamities @ just ₹9/month*
Compare and Save
Compare and save up to 28%**
Bank-approved policy copies
Bank-approved policy copies
No paperwork
No paperwork
Instant online policy issuance
Instant online policy issuance
Name

So that we know what to call you.

Name

We'll send your policy copy & important updates to this number.

Continue
By clicking on "" you agree to our Privacy Policy & Terms of Use
Get Updates on WhatsApp

How are Commercial Property Insurance Rates Determined?

The real estate market might be booming at a time or facing a dip at others – but what remains true at all times is the inherent value in investing in this sector. Educated guesses are possible only when one has studied the market in-depth, and is versed with property appreciation. A long–term trade – real estate requires one to study intently the cash flow, rate of return, and market trends – to make profitable investments others would vie for.

Read more

Factors that Impact Commercial property insurance

Understanding external factors that go on to decide and derive net commercial insurance value can be a complex matter to unravel. The business type, the location you function from, and the condition of the insurance industry at the moment all come together to decide the impact of the market on property insurance rates. For rating commercial property insurance, a multitude of factors come into play. But the four key characteristics as underlined by carriers continue to be the driving reason for commercial home content insurance rates and they are the following:

1. Construction of the property:
Home content insurance rates are majorly decided by the quality of material used in the construction of the commercial estate in question. Fireproof-resistant interior floors or walls cost far less to insure as compared to regular brick or stone houses. Upgrades in electrical wiring or HVAC systems – especially in new constructions help the investor insure for less.

2. Occupancy of the property:

The more the risk associated with the occupation for which the property gets used – the higher the property insurance rates. It is less to insure a florist than a restaurant, a mom-n-pop’s compared to an auto repair shop. Premiums of an estate also increase if they happen to share premises with a high-risk business.

3. Protection:

Carriers consider the above 4 factors while coming up with their insurance rate, aided by property inspection. The home insurance premiums get decided by multiplying the value of building and content with risk correlation. High-risk properties will tend to have high property insurance rates while low-risk properties usually cost investors far less to insure.

The two types of protection taken into account include Public Protection offered by the local fire departments or Private Protection offered by the fire protection methods as opted for by the policyholder.

4. Exposure:

Neighborhoods with higher crime rates or prone to property loss from vandalism are going to raise the price of the insurance premium and the cost of the insurer too. It can also happen if surrounding areas be prone to natural disasters or man-made accidents. Businesses located near a fireworks factory can be sure to attract higher property insurance rates.

How is the Commercial Property Rate Calculated?

The three methods to appraise a commercial property that one ought to consider while making an informed decision about your next investment are as follows

  • The Income Approach: This approach uses the capitalization rate or cap rate to establish property income. The net operating income of the property when divided by the current sales price of the property gives one its Capitalization Rate.
  • The Replacement Cost Approach: A much more complicated route to value commercial real estate properties – the Replacement Cost Approach will consider the land value on which the estate stands as of now. The cost of building the same estate is then factored in and added to the land value. The final property value number emerges as the depreciated value is finally considered.
  • The Market Value Approach: Considered to be the simplest method while calculating commercial real estate property value – the Market Value Approach uses a comparative method to weigh the property in question to properties of similar use and size in the surrounding area – currently put up for sale or already sold. This comparison helps determine the range within which the property in question gets placed. The number van gets adjusted with trends emerging in market research, along with dates of sale of the other properties, their age, size of land, land to building ratio, tax policies of the locality, etc.

The client thus pays what they are willing to within an open, fair, and competitive market. One can often get swayed with the personal value attached to the property or the utility it serves. The Market Value approach thus springs a number of buyers and sellers can start their negotiation from. This one is also widely known as the Sales Comparison Approach or the Comparable approach.

Conclusion

Commercial Property Insurance is but a volatile market wherein a considerable number of factors act as players while deciding the best insurance pricing of real estate. The above insights help you manage your risks and make better investment decisions.

Written By: PolicyBazaar - Updated: 08 February 2022
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Home Insurance Articles
Buying your dream house can be one of your most significant investments in life, for which you might avail of...Read more
21 Sep 2023 by Policybazaar 3422 Views
Purchasing a home is one of the most financially sound decisions one can make. Any decision taken in a hurry might...Read more
07 Feb 2024 by Policybazaar 491 Views
Housing society insurance is a one-stop solution for all residential societies against unforeseen damage caused by...Read more
14 Feb 2024 by Policybazaar 532 Views
Owning your dream house is one of the significant milestones in a lifetime. Remember, your home is not merely a...Read more
30 Jan 2024 by Policybazaar 399 Views
In home insurance, it is essential to know the differences between two major aspects: Loss of Rent Cover and Rent...Read more
16 Apr 2024 by Policybazaar 147 Views
Loss of Rent (LOR) coverage is a significant feature of a home...Read more
09 May 2024 by Policybazaar 73 Views
A sum insured in home insurance refers to the maximum payout...Read more
18 Apr 2024 by Policybazaar 110 Views
In home insurance, it is essential to know the differences...Read more
16 Apr 2024 by Policybazaar 147 Views
Having a home of their own is a significant milestone in one's...Read more
15 Feb 2024 by Policybazaar 246 Views
Housing society insurance is a one-stop solution for all...Read more
14 Feb 2024 by Policybazaar 532 Views

Reviews & Ratings

4.4 / 5 (Based on 120 Reviews)
(Showing Newest 10 reviews)
Virendra
Bokaro, July 26, 2022
Coverage for natural calamity
I was looking for an insurance policy that provides me coverage for natural calamity. Since my house is located near a river and it floods my area in the rainy season. So i went on the Policybazaar website and particularly look for this coverage found the exact plan that provides this coverage.
Sunil
Bilaspur, July 26, 2022
Premium Calculation
I was looking for a home insurance policy online. I stumblled upon the Policybazaar website and it is one of the best online platforms to purchase home insurance policy. I learned about the insurance plan i wanted to purchase and after choosing the plan and add ons i could calculate the premium using their online premium calculator. Thanks Policybazaar.
Manish
Bikaner, July 26, 2022
Natural Calamity cover
I have recently purchased a flat and wanted to cover it with a home insurance policy. I was aware of the Policybazaar website so i thought i should give it a try. I went on their website and as i wanted to cover my flat with a natural calamity cover specifically i searched for it and without wasting a minute it showed me the natural calamity coverage.
Mohit
Amritsar, July 26, 2022
Enough coverage
I was looking for a home insurance plan online. I was fed up as i have to visit different websites to look for a single suitable insurance plan. However, i stumbbled upon Policybazaar website where i was able to find the right insurance plan that could provide me enough coverage.
Sahil
Bareilly, July 26, 2022
Nice customer service
I wanted to purchase a home insurance policy and a friend of mine suggested to purchase it from Policybazaar. I bought the policy and after that i had a confusion regarding exclusions so i called up Policybazaar customer care and they cleared out the confusion and i loved their customer service.
Jitendra
Ajmer, July 26, 2022
Qiuck claim
I purchased a home insurance policy recently. However, due to a natural calamity, my house was damaged as the pressure of the water because of flood broke the enterance door of my house. But the insurance plan that i bought got me covered and i as able to get the quickest claim possible.
Prashant
Delhi, July 26, 2022
Natural calamities covered
I bought a home insurance policy recently. As i live near a river and in the rainy season, my area gets flooded so in order to protect my house and its contents, i purchased the insurance to get coverage for such natual calamities and i am tension free now.
Sharad
Kolkata, July 26, 2022
Wide coverage
The home insurance plan that i purchased from policybazaar's website is a great plan that provides me coverage for not only the structure but also cover several expensive content of the home such as paintings, mobile phones, laptops, television, etc.
Ravi
Ahmedabad, July 26, 2022
Suitable insurance plan
I purchased the group health insurance policy from Policybazaar website. First of all, i did not have to wander much online while lookig for a home insurance plan that fits my requirement and i found the suitbale home insurance plan by comparing different plans on the website.
Yashashvi
Amritsar, June 09, 2022
Natural calamities covered
I bought a home insurance policy recently. As i live near a river and in the rainy season, my area gets flooded so in order to protect my house and its contents, i purchased the insurance to get coverage for such natual calamities and i am tension-free now.
  • Disclaimers+

    #Savings of 28% are based on the comparison between the highest and lowest premiums for a pucca building with sum insured of >₹ 1 crore at Delhi, for property age less than 5 years and policy term of 11 years.

top