Do my commercial property premiums have anything to do with my building's ISO rating?

Q:

Do my commercial property premiums have anything to do with my building's ISO rating?

A:

Your building's ISO rating most commonly describes the type of construction used in making it. There are six ISO types for construction code descriptions and while I will not go into a lot of detail here, they essentially describe the type of materials that were used to construct your building.

Since fire is one of your insurance company's primary concerns and makes up the base rate that you pay, ISO codes affect your premiums by telling the insurance company how big of a fire risk your building is. As you might expect, a higher risk building will carry with it a higher premium (see Business Insurance: Building, Contents, and Stocks to learn more about protecting your building and other assets).

In the insurance industry, there are five general types of building construction we look at:

  1. Fire Resistive: your building is constructed with materials that can withstand a controlled fire for two to three hours in a laboratory setting
  2. Non-combustible: your building's structural members are made of non-combustible materials
  3. Heavy Timber: your building's structural members are made of heavy wood
  4. Ordinary: only the load bearing walls are non-combustible
  5. Frame: even the supporting walls and load bearing structures are made of wood

This list is ordered from the safest to riskiest type of building construction. If your ISO code represents a kind of construction that is lower down on the list, that will almost certainly translate into higher insurance premiums.

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Written by Jacques Wong
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Jacques grew up around the insurance industry and began actively participating in 2013. Since then, he has gotten a Level 2 license, won an Insurance Council of BC award in 2015 for academic excellence in the insurance licensing courses and educates insurance professionals through PNC Learning.   Full Bio