Type of Construction & How It Affects Your Premium

Calculating premium for Real Property has many different factors. One of the largest factors involved is the type of construction of the building. Use this article to find out how to determine what type of construction your building is, and what the construction type might mean for your rates.

While there are various styles of buildings and many different building materials available, each structure can be categorized into a certain class, based on the construction of its outer walls and what the floors consist of. Below you will find the different classes used, and how they compare to one another. The list is organized from Most Susceptible to Fire, to Least Susceptible to Fire:

Frame/Brick Veneer:

This type of construction is the most common for homes and small commercial buildings. This class gets its name from having the structure framed and supported by wood or light steel frame. Brick Veneer is part of this category because the brick on these buildings does not actually support the structure. Frame construction is the easiest class to burn down or blow over, but it is also one of the cheapest and most versatile buildings to construct.

Joisted Masonry:

In this class, the building is supported by cinder blocks, precast cement walls, or layered, load-bearing bricks. When cinderblocks are used, a brick veneer façade is often added for visual appeal, but, again, the bricks add no structural support. While the outer walls are masonry, the floors will be wood or light steel joists. Being so, this class is more expensive to build, but is less likely to be burned down or blown over than Frame.

Non-Combustible:

As the name implies, these structures are made of non-combustible materials. This type of construction is typical used for utility buildings and garages, as the structure is entirely made of light steel or similar light, non-combustible materials. These types of structures are harder to burn down than both Joisted Masonry and Frame, but wind resistance varies. These buildings are also less furnished than other structures (no drywall, no insulation, exposed wiring, etc.), making them cheaper to build than the other construction types.

Masonry Non-Combustible:

In Masonry Non-Combustible, the outer walls are made of cinder block, load-bearing brick, or poured cement, while the floors are either heavy steel, poured concrete, or both. This is typically the type of construction used for small to medium sized commercial/industrial buildings. This construction type makes the building harder to catch on fire and sturdier than the Joisted Masonry construction, making it safer.

Modified Fire Resistive/Fire Resistive:

These types of constructions are used for mid-sized to large buildings (E.g. Skyscrapers, multi-floor shopping complexes, etc.) as these buildings typically hold a lot of people and a lot of property. The construction can vary slightly, but these buildings are a step above Masonry non-combustible as fire-proofing techniques have been used on the structure. The jump from Modified to full Fire Resistive depends on the degree of the fire-proofing done. The common fire-proofing test is a multi-factor test. (The class rating is determined by the inside temperature staying below ‘X’ degrees for ‘Y’ or more hours with a fire burning at ‘Z’ degrees. Different variants of ‘X’, ‘Y’, and ‘Z’ create different fire-proofing classes of fire-proofing. )

Why Do These Classes Matter?

Determining the construction of the building is an essential part to receiving a quote. All property-insurers will need to know the construction type before they can provide a quote. This is because each construction type carries a different rate, depending on its susceptibility to certain perils (E.g. Fire). For example, let’s say you have an apartment building you wanted to insure. You think it is Frame construction when it’s actually Joisted Masonry. The premium you’ll pay is going to be higher than if it was properly rated as a Joisted Masonry building. Furthermore, some buildings are too risky to insure if they weren’t constructed with appropriate materials. As an example, some companies will refuse to quote buildings over two stories if they are Frame construction.

Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.

Preparing for Winter: A Homeowner's Guide

The leaves are starting to fall, the days are getting shorter, and Husker Football is in full swing. Just around the corner is winter, and with it brings many possible headaches for homeowners. This article will give a list of items to do to prepare the exterior of your home for the winter.

The autumn chill has set upon Nebraska, whether we like it or not. The months ahead will only get colder, and with Nebraska weather you never quite know what to expect. Though there are some things you just can’t avoid (thus your Homeowner’s policy), there are a few maintenance items that you can do to help keep your home claim-free this winter:

• Start out with a visual inspection of your roof. If it’s a pitched roof, make sure there aren't any missing shingles or tiles. Also make sure to check for warping and worn-out shingles. For those with flat roofs, make sure bubbles haven't formed, and make sure that the gravel is thoroughly covering the membrane. Have any problems fixed.

• Next, inspect the flashing. The flashing is the covering where your roof changes from sloped to vertical (or horizontal to vertical).  It can also be found around skylights, vents, and chimneys. Worn out flashing is a great place for water to slip underneath, causing big headaches later on. Make sure to have any damaged or worn out flashing replaced.

• While still on the roof, make sure all of the gutters and downspouts are clean. Leaves, dirt, and shingle bits can clog them (parents, you might find some missing toys while you're at it!). Clogged gutters will trap water, and when it freezes, all sorts of problems can happen.

• Now make your way off the roof to inspect the premise. Make note of any trees with dead branches or branches that hang over your home. Make sure to have these types of branches trimmed, as the weight of snow and ice along with high winds could make them fall, damaging your roof or hurting someone walking underneath them.

• If you found large problems with your roof and it needs to be replaced, now is the time to consider upgraded hail-proof roofing products. Many insurers will provide a discount for new roofs, and most offer an additional discount for hail-proofing.

Nobody likes claims, so take an afternoon to check over the exterior of your home. Catching a small problem before it turns into a big one could save you a lot of time and money! 

Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.

Agreed Value: Combating Coinsurance

In this article, we will be discussing how Agreed Value affects the Coinsurance Clause on property insuring policies, and how Stated Value works on your auto policy. Please be familiar with Coinsurance, Replacement Cost, and Actual Cash Value before reading this article.

The Coinsurance Clause is a safeguard that keeps property properly valued. You can insure your home for its full worth with Replacement Cost (RC) valuation, or you can insure it for its depreciated worth with Actual Cash Value (ACV). However, sometimes you want to insure something for an amount that isn't either of those values—this is where Agreed Value comes in.

Let’s use an older home for an example. Its Replacement Cost is $350K, and after depreciation, it’s only technically worth $200K, which is the Actual Cash Value amount. However, its market price is $150K. Wanting to insure it for what it is worth on the market would end up in a coinsurance penalty at claim time, so you changed the valuation to Agreed Value. With Agreed Value, the Coinsurance Clause is suspended, so no penalty would apply if a loss were to occur. Using Agreed Value usually results in a premium charge, but would most likely cost less than insuring the home for the full $200K.

Another use for Agreed Value is going beyond ACV. Using the same values as the first example, let’s say the homeowner has put a lot of time and money into the house. The homeowner believes the home is actually worth $250K. Using ACV, the most that the homeowner would receive after a total loss is $200K. However, using Agreed Value, the homeowner can insure the home for any amount he or she wants that is in between the ACV and RC amounts—as long as the insurer will agree to it.

When insuring vehicles, insurance companies automatically insure them for ACV. The Stated Value of the car is the current value, which accounts for depreciation. However, if the car is damaged mid-term, the Stated Amount given at the policy inception may be outdated, and the amount paid out may be less than the Stated Amount. To bypass the Stated Amount uncertainty, vehicles can be insured at an Agreed Value. If the carrier allows for Agreed Value, the value shown for the car is the exact amount paid out after a total loss.

Agreed Value allows for policy flexibility that would otherwise be impossible with the Coinsurance Clause and Stated Value. There's a lot of options at your disposal to create the perfect insurance program for your situation, so make sure to discuss it with your agent!

Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.