When it comes to protecting their investment, many building owners and tenants make one crucial mistake. They think that all insurance policies are the same. After all, a building is a building, and insurance is insurance, right? This common assumption is magnified with certified green buildings. While the owners of green buildings realize that their buildings are different, many don’t realize they need specialized insurance programs to fully protect them. To their surprise, many elements of a green building may not be covered by even the best standard building insurance policy.
People who own green buildings often think they have a replacement cost policy that means the building will be replaced. While this is true, it does not necessarily mean it will cover and replace all of the green elements that were in the original construction. Unfortunately, most people don’t really know how well their insurance will protect them until it’s put to the test.
As a result of the industry shift toward building green, there have been several “green” insurance products introduced in the last year. These products assure that a certified green building will be rebuilt and returned to the same level at which it was originally certified. In some policies this even includes a certain limit to cover the cost of commissioning and certification. Coverage is offered for office, retail and industrial buildings as well as mixed-use and multi-family projects.
One should keep a few simple things in mind when insuring a green building. First and most importantly, always make sure that in the event of a loss, the building will be repaired or rebuilt to the same or better standard than when it was originally built
Second, it is important that you understand who is responsible for insuring the building. While owners of green buildings should be informed about the insurance coverage available to protect projects, the tenants of these buildings should also understand the liabilities and how to ensure coverage. Some green project owners will build a core and shell that carries a green certificate and then leave the interior certification to the tenants. Others opt to develop the entire building, including the tenant improvements (TIs), to green certification standards. In these buildings, although the tenants are getting turnkey space, they may be responsible for the cost and replacement of the TIs, in the event of a loss.
Next, it is important to work with an insurance agent who understands these needs and can develop a protection plan that fits the particular property. Whether it’s a green building being constructed from the ground up, an existing space being renovated to a “green” status, or a project deemed “historical preservation” being revitalized using green standards, each has its own set of protection needs.
Finally, with green building quickly becoming the standard for future development, make sure you explore “green” insurance options that are available for traditional buildings. With this type of policy, in the event of a loss to a traditional building, the damaged portion of the building will be repaired or replaced using green products and green methods. If the building qualifies for certification, this policy may also pay for the commissioning and certification.
Keep in mind, the purpose of a business’ insurance policy is to protect the business, and the investment made in it. If it doesn’t do that, it’s not worth the paper it’s written on.