Study 4: Underwriting the Risk: Property - Summary (Part 2) Flashcards
Reasons why the problems facing a commercial business are often heightened (compared to a private dwelling)
- commercial businesses are often larger than dwellings;
- they often have more than one occupant;
- the occupants’ activities are usually varied and more dangerous than those of a dwelling’s occupants; and
- the exposure commercial businesses face from surrounding buildings tends to be less predictable and more severe than is true for dwellings.
Considerations for the construction of a small commercial business
- Building age or location
- Municipal bylaws
- Construction
- Construction materials
- Heat source
- Power loss contingency
Building age or location
(Commercial construction)
Commercial buildings can be affected by age (ex. condition of wiring, structural members, roof). Commercial businesses located in less frequented areas may be more susceptible to break-ins and vandalism. Good to have photos of both the front and back of the business (the front may be modernized but the back may be in disrepair).
Municipal bylaws
(Commercial construction)
Building may not meet current zoning requirements and instead may have been grandfathered (i.e. granted an exemption due to age).
Construction
(Commercial construction)
Open spaces are common in commercial buildings, and may heighten the potential for fire to spread. The space must be large enough to accomodate equipment or machinery if necessary.
Construction materials
(Commercial construction)
This question is crucial, since commercial construction varies more than dwellings. Buildings are unique in that they may be designed for a specific use. Changes in occupancy may lead to changes in design and materials used.
Heat source
(Commercial construction)
In commercial properties, heat is often generated by boilers and related machinery. Underwriter will want to know the source of heat, what fuel is used, etc. A similar concern is what is manufactured and how much power it uses.
Power loss contingency
(Commercial construction)
A manufacturing operation will need constant power. Power is also needed for heating and cooling systems. Losing power and not having a backup plan could result in a loss of profit - backup generators may be needed.
Considerations for the occupancy of a small commercial business
- Real business
- Hours of operation
- Storage arrangements
- Housekeeping and maintenance
- Customers
- Seasonal operating times
- Special hazards
- Flammable liquids
Real business
(Commercial occupancy)
A retailer sells things but does not manufacture them. A baker, on the other hand, may bake on premises and then sell at the same location, leading to a higher risk.
Hours of operation
(Commercial occupancy)
The more hours a business is open to the public, the greater the risk that something may happen to cause a loss. Hours of operation for a place with a drive-thru window may be different from one without. Employees may also be at the location working outside of hours of operation.
Storage arrangements
(Commercial occupancy)
How much storage space is needed by the business, and what items are stored on the premises? Fire hazard could be created if the space is inadequate or boxes are piled too high. Doors and aisles may be blocked.
Housekeeping and maintenance
(Commercial occupancy)
Special concern if anything is happening on the premises that could be a hazard if the space is not clean (ex. commercial operations involving cooking must be kept clean for fire safety and health reasons)
Customers
(Commercial occupancy)
How much customer traffic there is in and out of the business? A business with no walk-in customers (i.e. online or delivery only) has different exposures than a place which serves walk-ins.
Seasonal operating times
(Commercial occupancy)
Some businesses are only open at certain times of the year (ex. a business in cottage country may only open in the summertime), which means they could be vacant the rest of the year.
