Historic property and buildings give businesses an opportunity to serve their customers from one-of-a-kind locations, often with stunning architecture and charming curb appeal, while supporting cultural and historic preservation. But there are some crucial factors your company needs to keep in mind if you do business at a historic property.
Whether you’re leasing or purchasing a space, there are various operating hurdles that need to be addressed. One of those is insurance that protects your investment and the historic property itself.
Preserving historic buildings often plays a significant role in revitalizing neighborhoods in cities and towns throughout the country. Protecting those buildings while making them operational for your distinct business use requires an expert risk management team. You will need to consider the value of the property, the codes with which you will need to comply should a disaster affect your historic structure, and the cost of replacing architectural components if they are damaged while in your care.
You may also have higher-than-average exposures to general liability insurance claims because of hazards such as uneven floors, low door headers and narrow, steep staircases. Typically, pipes are older, and electrical is often missing key fire prevention elements, such as GFCI outlets. You may be permitted to use the building without upgrading, but talk to your insurance professional about the applicable rules and your best options.
You may have taken advantage of financial incentives for revitalizing or restoring a historic building, such as low-interest loans, grants or tax-favored financing that can help businesses or nonprofit organizations adapt a property for its use. Each of these lenders or investors will have a financial interest in the building you use.
If you occupy a modern building in a historic district, you are not off the hook. Your liability for damage to adjacent structures is a key consideration in your insurance. Understanding who must be financially compensated in a loss event is crucial to getting the right level and type of insurance coverage.
Know also that any changes you make to your building can affect the value of your property and those near your business. You should have a property valuation done by an expert in historic properties so your insurance policies are written with the appropriate limits and compensation clauses, such as replacement value.
Historic structure coverage should include guaranteed replacement cost. Structure coverage must take into account factors such as specialized materials, craftsmanship and techniques. Valuable articles coverage may be necessary for some architectural details, such as stained-glass windows. You may also benefit from joining a group that curates or invests in historic properties so you can take advantage of their collective knowledge and loss control advice.
To protect against your liability for harming the value of nearby buildings with your renovations, you’ll need specific coverage during and after construction. Think of a business whose renovation company undermines the foundation of a building next door or damages its pipes or exterior – or, worse, causes a gas line explosion. If your contractor isn’t properly insured, your company could find itself liable for damages. Talk to your insurance agent or broker before you begin any remodeling or sign any contracts with renovators.
There are usually strict guidelines on alterations for both cultural and financial reasons, so get to know your local rules (and regulators).
Local regulations can pertain to a single historic building or to an entire historic district. For any property, the restrictions may be part of the zoning regulations, in the deed to the property itself, or in your lease contract. Building codes should be considered when you build your insurance portfolio. Ask your insurance agent or broker about the benefits of building ordinance or law coverage, an endorsement to a commercial property policy that covers expenses of rebuilding to upgraded codes.
Some historic districts have different guidelines for specific areas. For example, there may be one set of guidelines for storefronts in a downtown area and different guidelines for historic residences that have been converted to office or professional spaces.
When your business is in a historic property, there will likely be guidelines you will need to meet regarding the exterior of the building, including signage and storefront design. Exterior and architectural details that are regulated often include:
While there are typically fewer restrictions on interior modifications, it may be necessary to obtain permission to make changes that would affect original building materials, for example, drilling through original plaster walls for wiring. All of these rules can add substantially to the cost of repairs after a disaster and will affect the limits of insurance you purchase, so it’s important to understand the requirements and their associated expenses.
Historic buildings are not exempt from the Americans with Disabilities Act (ADA), so alterations to improve and provide accessibility may be necessary for any building that is not compliant. Remember that lawsuits over accessibility abound, so be sure to address ADA measures before opening for business.
Along with restrictions on renovations or alterations, there may be other zoning restrictions in a historic area, such as parking restrictions, permitted use restrictions or limits on operating hours. Some of these rules can affect your business income or business interruption insurance coverage – a protection all businesses should consider.
Before leasing space in a historic building, consider asking some of the following questions about the interior of the building:
Several insurers offer specific programs for historic properties, which is great news for your business. Some are offered through global insurance companies, while others are offered as program insurance or specialty coverage by smaller firms. Your insurance agent or broker can help you find a policy – or blend of policies – that suit your particular needs.
Your investment in preserving history is an admirable one – and one to protect – so work with your insurance agent or broker for a good review of your property, your liabilities and your options for coverage. Then enjoy contributing to your local culture and community with confidence.
If you have any questions or are doing business on a historic property, connect with us to learn more.
At General Insurance Services, we are a team of insurance professionals with an array of experience, backgrounds, and interests. We’re advisors with a mission to secure the future of the communities we serve. Share our knowledge through this blog allows us to get one step closer to achieving our mission.