Restaurant Insurance – If You Have a Vintage Building, Consider This Approach

If you are a restaurant owner who also owns the building where your restaurant is housed, then you should take the time to consider exactly how the coinsurance clause on your property insurance policy works and what it means for you. To gain a better understanding of the coinsurance clause itself, please read my blog called, Coinsurance for Restaurants. In addition, if the building that you own is an older one, then you may find that the coinsurance clause is punishing you in a big way. In that case you may be looking for an alternative. That alternative can be a policy with a functional replacement cost clause.

As my earlier blog indicated, your coinsurance clause is based on the replacement cost of your building. But with older buildings there are many issues that skew the replacement cost of the building far too high. Simply stated, the functional replacement cost clause allows the building to be replaced with similar property that performs the same function but is less costly.

Functional replacement cost provides a combination of three separate coverages. They are:

Building limit of insurance – This covers the value of the building that you are going to replace at the time of the loss.

Demolition Cost -- This covers the cost to demolish and clear the site of the undamaged portion of the building which is caused by enforcement of ordinances.

Cost To Reconstruct In Compliance With Ordinance Or Law -- Generally speaking, you must repair or replace the building for this coverage to apply.

So who should use the functional replacement cost clause? This form is recommended when any of the following situations exist:

You own the building but in the event of a loss, you would only want to replace a portion of the building. Or, your building contains materials or design that is costly and difficult to replace. For instance, your building may have plaster walls but would happily replace them with dry wall after a loss. Another example would be if you would want to change the entire construction type of your building after a loss, perhaps replacing a masonry noncombustible building with a frame one.

What are the advantages of using this form in these cases? First of all, you can usually purchase a lower limit of insurance without putting yourself in jeopardy of the dreaded coinsurance clause. Secondly, total and partial losses can be settled on a replacement cost basis without a deduction from your claim for depreciation. Third, ordinance or law coverage for increased construction or repair costs is included in the form.

At Clinard Insurance Group, in Winston Salem, NC we specialize in helping restaurant owners of all types of restaurants with their insurance needs. We want all of our clients to be informed insurance consumers and to understand exactly what they are buying. To make this process a bit easier, we have developed 5 different restaurant insurance programs so that you aren’t a square peg forced into a round hole. We know that all restaurants are different and that is why we have develop specialized restaurant insurance programs for fine dining, casual dining, fast food, bar & grill and even catering. To see all of our restaurant insurance programs, visit us online at www.TheRestaurantInsuranceStore.com or call us, toll free at 877-687-7557.

The source information for this article was pulled from articles found at The Restaurant Answer Guy blog site.