Fire is one of the deadliest threats to commercial real estate. According to National Fire Protection Association (NFPA), there were 499,500 structure fires in the United States, and 28% of these structure fires affected commercial buildings and caused billions of dollars in damage.
A separate analysis from Hartford Insurance Company found that fire damage was one of the five most common reasons for a claim, with an average cost of $35,000 per claim. Within the next decade, it is estimated that four out of ten businesses will file commercial fire insurance claims.
These statistics make it clear that managing business fire risks is critical to protecting people, property and profits. Continue reading to learn more about the causes of business fires, how to prevent business fires, and how to use commercial property insurance to protect yourself from damage.
Causes of business fire
The most common causes of fire vary by commercial industry. For example, cooking equipment is the most common cause of fire in office buildings. According to NFPA, 29% of all fires in office buildings are caused by cooking equipment. Other common causes of office fires are faulty electrical systems, lighting and heating equipment.
Industrial spaces such as manufacturing facilities are also affected by thousands of fires each year. According to NFPAmunicipal fire departments saved an average of nearly 38,000 fires at manufacturing facilities each year between 2011 and 2015. Additionally, electrical distribution and lighting equipment accounted for 24% of all structure fires.
How to prevent a business fire
There are many ways to protect your business in an emergency. Fireproofing your business has the potential to save lives and thousands of dollars in out-of-pocket costs.
Install an alarm system and sprinklers. Security alarm systems work to deter arsonists and other criminals from committing crimes. Fire sprinklers are also very effective. According to Encore Fire Protection, professionally installed and maintained sprinklers can reduce direct property damage costs by 68%.
Invest in fire extinguishers. The number one cause of fires in commercial buildings is caused by cooking equipment. These fires usually start small and are easily extinguished by a portable fire extinguisher. Be sure to place your fire extinguishers where they are easy to access, closest to your kitchen. Also, check them regularly to ensure they are in working order. Dirt build-up, rust, drips and excessive vibration caused by nearby machinery can cause fire extinguishers to leak and deteriorate over time.
All portable fire extinguishers should also undergo routine inspections. Many insurance policies apply NFPA 10 requirements, where fire extinguishers must be inspected and tested regularly. A faulty fire extinguisher can mean the difference between life and death. Other policies require companies to comply NFPA 72National Fire Alarm & Signaling Code Standard, which ensures compliance with the proper installation, testing and maintenance of fire alarms.
Create a fire evacuation plan. Fire evacuation plans help protect people and businesses by establishing a clear plan of action when a fire breaks out. It is important to establish a chain of command, define roles and responsibilities with employees and map out primary and secondary escape routes. Fire evacuation plans also involve establishing preferred and secondary communication methods to ensure that all affected employees are notified promptly.
How to protect yourself against business fire risks with insurance
One of the best ways to protect yourself against business fire risks is to maintain adequate commercial property insurance. Commercial property insurance protects against fire damage to your building and its contents such as fixtures and equipment.
A business owner’s policy (BOP) is an alternative to commercial property insurance. BOPs are prepackaged packaged property and liability policies designed for smaller businesses, while commercial property insurance offers stand-alone coverage options for larger businesses with higher risk complexity.
Regardless of policy type, property insurance limits should be reviewed at least annually to ensure they are adequate to cover rising property values and repair costs. This is especially important now that inflation, supply and labor shortages are all greatly increasing repair costs and time frames. Keep in mind that if you have a fire claim and your property insurance limits are not sufficient, your claim payout can be reduced with a co-insurance clause.
Contact the insurance team at BNC Insurance for property insurance guidance and options and to review your policy limits.