According to the Insurance Services Office, Inc. (ISO), a majority of buildings with an automatic fire sprinkler system are not receiving potential insurance premium discounts that could be available. These insurance premium discounts can range from 10 to 60 percent depending on the insurance provider.
Why do insurance companies want you to have an automatic fire sprinkler system?
Automatic fire sprinkler systems are an incredibly reliable and effective component of a building’s fire protection system. Sprinkler systems protect both lives and property.
NFPA reports that in fires large enough to activate the sprinkler system, sprinklers operated 92 percent of the time. Sprinklers were effective in controlling the fire in 96 percent of the fires in which they operated. Taken together, sprinklers both operated and were effective in 88 percent of the fires large enough to operate them.
The main reason automatic fire sprinkler systems fail to operate is simply because of system shut off. When maintained and in operation, fire sprinkler systems are critically important for the protection of your building against the devastating effects of fire.
How are commercial property insurance rates determined?
For commercial properties, insurance premiums are set by the value of the building as well as its contents. Risk assessment of these factors determines the rates. Certain variables that help to determine commercial insurance rates include:
According to Nationwide, most of the time, properties with high risk have higher property insurance rates, while lower risk properties cost less to insure.
As you can see, it’s a complicated process with many factors. Once you find an insurance company that offers the commercial property insurance best for your needs, ask questions about specific coverage before committing. Or if you’re already with a reputable company, take the time to review your insurance policy and premiums to seek out discounts related to preventative measures like automatic fire sprinkler systems.
What type of insurance discounts are available for fire sprinkler system installation?
The answer to this question ultimately lies with your insurance carrier and facility type, but there are some general guidelines that can help.
In short, if fire sprinkler systems are required for your commercial building, there is little chance your insurance carrier will offer a steep discount on your premium since it is already a fire code requirement. National fire codes like NFPA 25 determine not only if your building requires a sprinkler system but also type and location.
However; some insurance companies will offer discounts and incentives for property owners who go above and beyond basic requirements. For example, installing systems in more hazardous or hard to reach areas as an extra layer of protection, or installing system upgrades. Research your specific facility type and hazard and work with a fire protection company for information on additional sprinkler system types and options.
Why won’t my insurance carrier accept my claim?
Your insurance company may have reasonable cause to dispute claims if your building was not up to code when a fire occurred. Simply having a fire sprinkler system is not enough. NFPA 25 also requires a set timeline for inspection, maintenance, and repair. If your insurance company finds that damage to your building was a result of a faulty sprinkler system (due to lack of maintenance for example), the full cost of all damages may be on you as the business owner. Your fire protection company can help you to maintain your fire sprinkler system, but you must maintain these systems on a regular basis to avoid costly consequences.
Another reason for denial in coverage are retrofits. A retrofit is when an existing building is repurposed. When this happens, the sprinkler system must be redesigned or replaced to protect the new layout and/or new hazards housed in the facility. Retrofit requirements are outlined by NFPA code. Use only a professional fire protection company to design and install retrofitted systems.
Can my commercial insurance premium go up after a fire?
As long as your insurance carrier does not consider you a “habitual claimant” and there’s no proof of fraud in your claim, you should not see any increase in your commercial insurance premiums.
Just because you’ve experienced a fire in your building does not automatically equate to a rise in insurance premiums; but be sure you have properly filed the claim and have all required fire protection systems in place and up to date.
Importance of record keeping
The property owner or facility manager is responsible for maintaining all records of maintenance and operation of the building’s fire sprinkler system. This means test results, inspection reports, repairs, etc. Insurance companies can, and will, ask for these records periodically.
Fire Systems, Inc. has advanced software that can help business owners and facility managers maintain appropriate records for AHJs and insurance companies confirming compliance. We are a family-owned and family-operated fire protection company with over three decades of experience in the Atlanta area. We have the ability to inspect, install, repair, and design fire sprinkler systems, all in-house without the use of subcontractors. Contact us today at 770-333-7979 or visit our website for more information.