Fire is one of the deadliest threats to commercial properties. According to the National Fire Protection Association (NFPA), there were 499,500 structure fires in the United States, and 28% of these structure fires affected commercial buildings, causing billions of dollars in damages.
A separate analysis from the Hartford Insurance Company found that fire damage was one of the top five 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 every 10 businesses will file commercial fire insurance claims.
These statistics make it clear that managing business fire risks is critical for safeguarding people, property and profits. Keep reading to learn more about the causes of business fires, how to prevent business fires and using commercial property insurance policies to protect yourself against damages.
Causes of Business Fire
The most common causes of fire vary by commercial industry. For example, cooking equipment is the leading cause of fire in office buildings. According to the NFPA, 29% of all office building fires are caused by cooking equipment. Other common causes of office fires include defective electric systems, lighting and heating equipment.
Industrial spaces such as manufacturing plants also experience thousands of fires each year. According to the NFPA, municipal fire departments responded to an average of close to 38,000 fires at manufacturing plants each year between 2011 and 2015. In addition, 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 a fire emergency. Fire-proofing 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 highly effective. According to Encore Fire Protection, professionally installed and maintained sprinklers can cut down the direct cost of property damage by 68%.
Invest in Fire Extinguishers. The number one cause of commercial building fires is caused by cooking equipment. These fires usually start small and are easily contained by a portable fire extinguisher. Be sure to place your fire extinguishers where they can be easily accessed, closest to your kitchen. In addition, check them regularly to ensure they are in working condition. Dirt build-up, rust, drops and excessive vibrations caused by nearby machinery can cause fire extinguishers to leak and degrade over time.
All portable fire extinguishers should also undergo routine inspections. Many insurance policies apply NFPA 10 requirements, stating fire extinguishers must be inspected and tested regularly. One defective fire extinguisher could mean the difference between life and death. Other policies require businesses adhere to the NFPA 72, the National 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 action plan once a fire breaks out. It is important to establish a chain of command, define roles and responsibilities with fellow employees, and map out primary and secondary escape routes. Fire evacuation plans also mean establishing preferred and secondary methods of communication to ensure 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 sufficient commercial property insurance. Commercial property insurance protects against fire damage to your building and its contents such as inventory and equipment.
A business owner's policy (BOP) is an alternative to commercial property insurance. BOPs are pre-packaged bundled property and liability policies designed for smaller businesses, whereas commercial property insurance offers stand-alone coverage options for larger firms with higher risk complexity.
Regardless of policy type, property insurance policy limits should be reviewed at least annually to ensure they are sufficient to cover rising property values and repair costs. This is especially important now that inflation, supply and labor shortages are all greatly inflating repair costs and timeframes. Keep in mind that if you have a fire claim and your property insurance limits are not adequate, your claim payout could be reduced by a coinsurance clause.
Contact the insurance team at BNC Insurance for property insurance guidance and options and to review your policy limits.