Fire sprinklers were invented nearly two centuries ago in the mid 1800s. Even then, insurance companies recognized the value of fire sprinklers and provided incentives to building owners who had them installed.
Insurance companies know that fire sprinkler systems will substantially improve the safety of a building resulting in less money paid out for losses. Therefore, the discounts offered on insurance premiums have always been one of the considerations for offsetting the fire sprinkler system cost.
Insurance Rating Systems
Although it is standard for insurance companies to offer discounts on premiums for fire sprinkler systems, exact discounts cannot be expressed because every insurance company has its own specific rating system. There are a wide variety of variables that are taken into account, including…
- The overall condition of the building
- The requirements of the state
- The status of the general economy
- The insurance company’s position in the market.
The Insurance Services Office (ISO) makes recommendations for different types of buildings in different locations to help insurance companies set rates. These recommendations include discounts for sprinklered properties. While not all insurance companies use the exact rates recommended by the ISO, there are many that do. Still, the companies that do not use the ISO recommendations provide similar discounts. Typically the spread between the insurances rates for an unsprinklered building and a sprinklered building are fairly comparable even if the base rates are different.
Factors That Can Contribute to Insurance Increases on Sprinklered Properties
Building owners should be aware that insurance rates on properties with fire sprinkler systems are dependent on testing and inspections. In most cases, an insurance company requires proof that a fire sprinkler system has been inspected and tested at least annually. If the insurance company does not receive proof of testing and inspection, rate increases are possible.
Common insurance rate increases for overdue inspections are as follows:
- A 5% increase if the building is up to 12 months overdue
- A 20% increase if the building is between 12 and 24 months overdue
- A 60% increase if the building is between 24 and 36 months overdue
- Unsprinklered rates will apply if the building goes longer than 36 months without an inspection, even if a complete sprinkler system is installed.
To prevent rate increases, it is vital that building owners have their sprinkler systems inspected and tested regularly and be sure to submit proof of the inspection to the insurance company.
Typical Offsets for Fire Sprinkler System Cost
Considering insurance discounts for regularly inspected systems, some businesses can reasonably expect that the savings can offset the fire sprinkler system cost in four to five years. In addition to improving safety and providing peace of mind, the cost savings from insurance discounts will continue to benefit the business for many years.
If you want to achieve the best insurance discounts for your building, contact AIE to schedule an inspection and testing of your fire sprinkler system today.