How Metal Buildings Save 30% or More on Insurance Premiums
Research conducted by the Metal Building Manufacturers Association (MBMA) shows premiums for steel building insurance are lower than for lumber or concrete structures. In fact, commercial and industrial businesses find steel building insurance rates as much as 30% lower.
Property Insurance Costs on the Rise
Insurance companies shelled out $135 billion for damages from wildfires, hurricanes, and earthquakes, across North America in 2017. Consequently, insurance companies must recoup losses.
Across the board, rates will probably increase 5% or more. In disaster-prone areas, like those along coastlines, expect rates to climb 10% to 20%. In areas hard hit by the catastrophic disasters of last year, commercial and industrial rates may spike as high as 25%.
Understanding How Property Insurance Is Priced
Insurance companies base their rates on several factors that speak to the amount of risk. The lower the risk of damages to your structure, the lower your insurance premiums.
The major risk factors that determine the commercial property insurance rate include:
- STRUCTURAL TYPE: How strong and damage-resistant are the structural materials and building system of the structure?
- SIZE: What size is the structure?
- AGE: What is the age of the building?
- OCCUPANCY: How many frequent or work at this business?
- BUSINESS: What type of business is being conducted in the structure? Do machines, chemicals, or other materials used in this structure increase the risk of explosion or fire?
- LOCATION: What is the local real estate market like in this area? How large is the lot? What is the quality of the land?
- DAMAGE RISK: Is it an area prone to theft, flooding, gale-force winds, earthquakes, fires, blizzards, hail, lightning, etc.?
- SAFETY ADDITIONS: Are there any added fire safety features, such as smoke alarms, sprinkler systems, etc.?
The number one factor determining the insurance price is usually the structural type.
Classifications by Building Type
The Insurance Services Office (ISO) compiles the data used to develop insurance rates. The ISO sorts buildings into six classifications:
- FRAME: Buildings constructed with combustible wood— or slower-burning composite materials— for exterior walls, floors, and roofs.
- JOINTED MASONRY: The structural support rests on concrete blocks, pre-cast concrete walls, or load-bearing bricks. However, the floors joists are typically wood or light-gauge steel.
- NONCOMBUSTIBLE: The outer walls consist of a noncombustible material. Noncombustible or slow-burning materials create the floors and the roof.
- MASONRY NONCOMBUSTIBLE: In this type of structure, cinder blocks, poured concrete, or load-bearing brick forms the outer walls. The floors typically use structural steel or poured concrete with steel.
- MODIFIED FIRE-RESISTIVE: This category generally denotes s multi-floored structures occupied by large numbers of people, like high-rises and shopping malls. The construction includes extra fireproofing methods.
- FIRE-RESISTIVE: As above, but includes even more fire-prevention materials and techniques.
For structures 15,000 square feet and smaller, insurance companies base their rates solely on the six classifications above. However, insurers assess buildings over 15,000 square feet individually, case by case.
How Building Classifications Affect Insurance Rates
Here’s a rough comparison of rates for the different building classifications:
- Classification 1: Because wood or composite structures typically burn or collapse more easily, these structures pay the highest cost-per-square-foot insurance rates.
- Classification 2: Based on improved fire-resistance and greater strength, insurance rates in this classification should be about 5% less than Classification 1 structures.
- Classification 3: Commercial-grade, low-rise pre-engineered steel buildings generally fall under the Classification 3 group. Typically, these buildings earn insurance discounts of about 30% over the lumber-framed buildings in Classification 2. Since fire is a primary concern of insurance companies, adding fire-protection features like smoke alarms and sprinkler systems may reduce premiums even more.
- Classification 4: This type of structure is used for larger multi-level commercial and industrial applications. Insurance rates may be 12% less than Classification 3 structures. However, the significantly higher construction cost offsets some of the insurance savings.
- Classification 5: Insurance rates for modified fire-resistant buildings are lower than Classifications 1-4. However, the greater building costs often override the lower insurance rates.
- Classification 6: These building systems cost the most per square foot to build, but do earn lower insurance rates. Surprisingly, Classification 6 insurance rates are generally not as low as those for Classification 5 buildings.
Why Metal Building Insurance Costs Less
Insurance businesses estimate premiums based on the likelihood of a payout and the projected cost of replacing the structure. Consequently, the more damage-resistant your structure, the less their risk, so the lower your premiums. Also, the more economical your building, the lower their costs of replacing, so the lower your premiums.
There are two reasons steel building insurance costs less.
First of all, pre-engineered metal buildings stand strong against adversity. Here’s how:
- The greater strength-to-weight ratio of steel provides built-in resistance to structural damage from earthquakes, hurricane-force winds, and heavy snows.
- The noncombustible nature of steel makes it less likely to experience damage in a fire, too.
- Since steel offers no resistance to current, it is safer than wood when struck by lightning. In a properly grounded metal building, lightning flows through the framing, passing harmlessly into the ground.
- As an inorganic material, steel even repels damaging mold, mildew, and wood-hungry termites!
Secondly, prefabricated metal buildings usually cost less to build than other building systems. Consequently, it costs the insurance company less to replace a pre-engineered metal building. Therefore, steel building insurance should be less expensive.
Be advised that insurance rates do vary from company to company. When getting an insurance quote, be sure the agent knows the specific type of structure you are insuring. Also, let the agent know about any additional fire safety measures included in the construction.
The Best Insurance Deal is a Real Steel
Talk to a RHINO steel building adviser today about your next low-rise building project. You can depend on their expertise to get you the right structure at the right price. Call RHINO at 940.383.9566 for details and a free quote.