INSURANCE, YES, BUT THE KEY IS PREVENTION!

Is real estate insurance mandatory? Do lenders require it? Or is it simply to guarantee the protection of your assets? Whatever the reason, it is essential to insure your real estate assets to cover damage to the building, as well as civil liability towards third parties.

Insurance pricing is based on the level of risk and the loss ratio of the insurers. Their actuaries evaluate the rates to be applied every six months. These re-evaluated rates are subject to other underwriting criteria that ultimately determine the premium rate (occupancy, type and year of construction, fire and theft protection, geographic location, etc.).

How do you get the best market rate available based on the level of risk? Through proactive, constant management! The key is prevention and the implementation of good practices. A building that seems to be in disrepair is often subject to a predictable loss, so it becomes difficult to demonstrate rigorous management and obtain advantageous insurance terms and conditions.

The risk of litigation is also assessed, i.e. is the manager or owner acting responsibly towards the public, the tenants and suppliers? Article 2503 of the Québec Civil Code provides a framework for the insurers' duty to defend, depending on the terms of the policy. Keep in mind that for the time being, defence costs are in addition to the limits of insurance. Insurers are therefore interested in underwriting risks for which management and control practices have proven to be adequate.

Typically, insurers base their pricing on the following factors:

• Renovations undertaken over the years

• Annual inspection of the sprinkler system and compliance with recommendations

• Periodic maintenance of fixed equipment, roof, electrical system, etc.

• List of tenants and their (commercial) activities

• Building occupancy rate

• Previous claims and their frequency

• T ype of lease and specific contract provisions

• Transfer of risk to tenant /service provider (e.g. snow removal service)

• Disaster recovery plan

• On-site or contracted maintenance crew.

It is the owner's responsibility to not only properly manage risk management practices, but also the property manager's various responsibilities as regards the professional ser vice providers. info@antrev.com | 514-499-1997

In addition to property and general liability insurance, several insurance products are also available to address various risks: professional liability (for the range of services rendered to clients), crime, theft and embezzlement insurance (for rents collected on behalf of clients), cyber insurance (to protect computer equipment and to guard against possible lawsuits for breach of confidentiality of third-party data), directors' and officers' liability insurance, etc. Each insurance policy has its own particular features, and must be examined with due diligence.

With proven good risk management practices, it is easier to negotiate insurance coverage and warranties that are more extensive and that come with a more attractive premium.

As the ad says: Your best insurance is an insurance broker! He or she is your best advisor for prevention, and for optimizing good prevention practices and risk transfer.