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Commercial property insurance is an essential component of any business’s risk management strategy. This type of insurance policy is designed to provide protection for a company’s physical assets, such as its buildings, equipment, and inventory. However, the cost of commercial property insurance can vary widely depending on a number of factors. In this Coverage Insights, we will examine the key characteristics of commercial property underwriting and how they can impact your insurance rates.

Types of Property Rating

When rating property insurance, insurers typically use one of two methods: class rating or specific rating. Buildings that have similar characteristics are assigned to the same class for class rating, and insurance rates for these buildings are an average of all those in a particular group. Specific rating is used for more complex buildings and takes into account unique features that are examined closely during an ISO inspection. Following the inspection, ISO or the insurer will calculate a specific rate.


The first and most basic element of a commercial property insurance rating is a building’s construction. Based on an ISO-developed system, insurers categorize buildings into one of six classes, with Class 1 being the most combustible and Class 6 being the most fire-resistant. Following an ISO inspection, your building may be assigned a specific class, which could substantially impact your rates.


The second factor in commercial property underwriting is occupancy. Underwriters will examine how a particular building is used (e.g., for retailing, manufacturing or renting). The contents of a building are also taken into account, with combustible materials such as grain dust increasing the risk of fire.


The third factor of commercial property underwriting relates to protection and the methods used to safeguard a building from fire. When it comes to protection, insurers will take into account both public and private protection. Public protection is provided by local fire departments, which are assigned a Public Protection Class rating based on an ISO-developed system. Buildings located in areas with a higher Public Protection Class rating will generally have lower insurance rates. Private protection, such as fire suppression systems and security measures, can also impact insurance rates.


The final factor in commercial property underwriting is exposure, which refers to a building’s susceptibility to damage from external factors such as natural disasters. Buildings located in areas prone to flooding or earthquakes will generally have higher insurance rates than those in areas with a lower risk of these events.

In addition to these four key characteristics, there are other factors that can impact commercial property insurance rates. For example, the state of the insurance industry in general can affect pricing, as can the business’s claims history and financial stability. It is important to work with an experienced insurance professional who can help you navigate the complex world of commercial property insurance and ensure that you have the coverage you need at a price you can afford.


Understanding the factors that impact commercial property insurance rates is critical for businesses looking to protect their physical assets. By taking into account a building’s construction, occupancy, protection, and exposure, insurers can accurately assess risk and set appropriate insurance rates. Businesses should work with an experienced insurance professional to ensure that they have the right coverage in place and that they are not paying more than necessary for their insurance policy.