Cancelling insurance – vacant and occupied property advice

In the third year of this pandemic, it may be possible to see a horizon where life returns to something resembling normal. But for many restaurant and hospitality owner-operators, things may never be the same. Many went from sit-down service to delivery, laid off all but essential staff, ramped up online ordering and sales, and looked for alternative ways of saving expense including cancelling or not renewing their insurance. That last item may give brokers pause.

Considering the risks owner-operators have faced and may continue to face as the pandemic evolves, there are insights brokers can share with their clients about their insurance.

Can We Talk?

Listening to clients talk about their business and how it’s changing is always a good idea.. According to Restaurants Canada’s “FOODSERVICE FACTS 2021: Putting the pieces together”, 97% of restaurant operators made changes to their business to survive. On that score, there’s much for brokers to talk about with their clients. Knowing what changes have been made to their businesses can only help from an insurance standpoint.

Don’t cancel your insurance. No, really.

Many small owner-operators may not fully understand what cancelling or not renewing their insurance may entail. They need to know that once their insurance is cancelled or not renewed, getting insurance later may cost much more than if they had kept a continuous policy in place.

Clients need to know that insurers are more likely to continue to insure a risk they’ve been covering for a long time, even if the risk isn’t really in their appetite anymore. However, once the policy is lapsed or cancelled, they’re less likely to reconsider taking the risk back.

Although claims can lead to higher insurance rates, moving a policy to another insurer may only result in short-term relief. But another claim could result in their policy being cancelled and/or significant premium increases because the new insurer doesn’t have the benefit of previous years’ premiums to offset any kind of losses.

Close up for a while and ride it out without insurance?

Again, owner-operators need to know what this may entail. Many may have temporarily closed their businesses and left them unoccupied as they ride out the latest wave. They may assume insurance isn’t required when their business is temporarily closed, and locations are left unoccupied. But most insurance policies require that a business notify their broker if a property is unoccupied to ensure claims are paid if there’s a loss.

While it’s tempting to try to save money by letting insurance lapse during these periods, the potential cost savings will likely not outweigh the potential risks. This is especially true while we’re experiencing not only the challenges of the pandemic, but severe weather challenges from coast to coast. 

What does the policy say?

Conditions on most policies require vacant or unoccupied premises to be checked on a regular basis to ensure the property’s safe and there aren’t any issues that might lead to a loss. A gentle reminder of what a policy requires can help clients protect their property.

Unoccupied properties, especially in winter, still require regular maintenance, and business owners are required to ensure they’re monitoring their premises appropriately. When a property is unoccupied and unvisited, clients may need to be reminded about possible damage, such as:

• Accumulation of snow in around the premises that can cause slip and trip hazards
• Water damage due to leaks or burst pipes
• Vandalism including malicious damage and graffiti
• Fire caused by arson or a defective electrical installation
• Theft damage to the building when gaining access
• Theft of building materials and contents
• General deterioration caused by adverse weather
• Issues with heating or HVAC systems
• Squatters

Permanently closed? The property still needs protection

Unfortunately, over the last two years, many owner-operators have closed, and the premises are vacant pending sale or rental. Owners should still ensure that they maintain their insurance while the premises are vacant and pending sale or rental.

If your client has a vacant property, they may need reminding of the following proactive measures to help reduce the risk of damages:

• Undertake a risk assessment.
• Remove all unnecessary items like furniture, packaging, and waste.
• Ensure that HVAC and boiler systems are maintained, water lines are drained, and heating is on to prevent pipes bursting in winter. Gas supplies should be turned off unless required for heating.
• Ensure that all combustible materials, including kitchen oil are removed from the premises.
• Remove any garbage and empty waste bins, moving them away from the building.
• Control access in and out of the premises and maintain a record of visitors.
• If required, ensure security fences are in place to prevent unauthorized entry.
• Prevent unauthorized entry by boarding up windows and/or adding security bars to windows and doors.
• Prevent unauthorized vehicle access by using padlocked gates, lockable security posts or substantial lengths of concrete.
• If unguarded, check and inspect the property on a regular basis to deal with issues while ensuring the property is secure.

If you suspect a client’s property is vacant for any time that exceeds 30 days and/or in accordance with their policy, the insurer may require immediate notice. Talk to your clients to ensure they have the right policy coverage for a vacant property.

As things continue to evolve, it will be critical for those in the restaurant and insurance industries to connect with one another. Helping clients understand what’s covered under a policy, especially any exclusions, may be vital to helping them continue to ride out this pandemic, and possibly a pandemic to come.