Insuring Historic Commercial Buildings

How do you insure a one-of-a-kind historic treasure?

Insuring a standard cookie-cutter mini-mall building is one thing; insuring a 100-year-old historic downtown building, with legacy construction techniques and materials – and irreplaceable charm – is quite another.

For example, historic buildings often use construction techniques and materials that are no longer common, or even available at all. Also, older buildings tend to be in older neighborhoods. Some older structures don’t have the fireproofing expected of newer structures – which means antique buildings are at an elevated risk of fire spreading from nearby buildings. Not every insurance company or agent understands how to underwrite these kinds of properties and ensure the building owner is adequately protected.

The Problem with ‘Replacement Value’ Methodology

Typically, commercial properties are insured using the replacement value as a guide for setting policy premiums and limits. For insurance purposes, replacement value is the cost it would take to rebuild a structure with the same function on the site, if you had to rebuild completely. If you started with a 400-seat movie theater, for example, replacement value would cover what it would take to rebuild another 400-seat movie theater on the same site.

But that kind of underwriting doesn’t work for historic properties: If you have a historic movie theater that is 100 years old, with antique, one-of-a-kind trim, mahogany counters in the lobby, and a value collection of cinema posters and cinematic museum artifacts in the lobby, it doesn’t make sense to have a policy that limits you to replacing it with a generic modern McTheater design. But a poorly-written policy limiting you to “replacement cost value” will paint you into that very corner.

Take Specialized Construction Methods and Materials into Account

Standard commercial building insurance policies only cover building techniques where rebuilding costs fall within standard industry guidelines and where the construction materials and skilled labor are readily available. That means that unless you make allowances when you purchase your insurance policy, your coverage will not compensate you for the cost of skilled specialists and artisans you will require to recreate your special building – even if the unique character of the building was a key part of the building’s attraction and utility in the first place.

The alternative, actual cash value replacement, doesn’t make sense for antique buildings, either. That’s because if the building is damaged or destroyed, you only get reimbursed for the book value of the property, after a deduction for depreciation.

Naturally, depreciation on antique buildings can be substantial.

Simply insuring a property for its current market value may not work either: A property could sell on the market for much less than what it would cost to replace it.

Functional Replacement Cost Coverage

Another approach to insuring older properties is functional replacement cost. This is, at least cosmetically, a useful lower-cost option to insuring antique properties. A functional replacement cost would take an antique fixture and replace it with a modern fixture that accomplishes the same thing with modern materials but at a lower cost. An old solid oak or mahogany fixture, for example, may be replaced with a plywood fixture of similar appearance and function. It keeps costs down, but both insurers and landlords should understand that even though function and a certain amount of appearance is restored via functional replacement cost insurance, quite a bit of value is lost in the process.

The Solution

For owners of antique buildings, it’s important to get actual historic replacement cost written into the policy. Not every carrier does this, and some agents who don’t regularly deal with these kinds of issues aren’t even aware of its importance. Generally, this kind of coverage means an on-site inspection and expert appraisal. Some carriers provide special underwriting for antique structures. We can help walk you through how to combine these coverages and apply them to your unique situation:

  • Allowing for costs of artisan construction and restoration experts.
  • Choice of valuation definitions
  • Increased business interruption coverage to account for the time-consuming, meticulous process of restoring a damaged historic property.
  • Registration, certification and regulatory expenses unique to antique or historic structures
  • Compensation for loss of tax credits/deductions if restored or rebuilt property loses eligibility.
  • Cost of upgrades under ‘green building’ standards
  • Underwriting for museum artifacts and valuable collections, works of art and historic documents.

Underwriting Is Key

Specific underwriting issues vary substantially from property to property. The distance to the nearest fire station can impact premiums, for example. And some types of property are prone to containing machinery or components never encountered elsewhere. For example, a church or cathedral may contain a large pipe organ that would cost hundreds of thousands of dollars to replace. And stained glass works can vary widely in total value from property to property, even among buildings the same size.

Insuring Contents

If the contents of your antique building are pretty straightforward, this isn’t a difficult riddle to solve – standard underwriting techniques apply to insuring the inventory of, say, a bike store in an antique building that apply anywhere. But unique commercial buildings often have unique tenants. A museum, for example, should approach insuring its contents with the utmost attention to detail, because of the value and generally irreplaceable nature of the museum’s artifacts.


Antique and historic buildings don’t lend themselves well to standard, off-the-shelf property insurance policies. Don’t settle for a computer-generated policy based on construction material and square footage. That works okay for mass produced buildings, but not for antiques. An on-site inspection and appraisal by a qualified expert is a must.

It also takes experience in the industry. These buildings aren’t a great match for brand new agents. It takes years for insurance professionals to develop the experience and underwriting expertise to ‘see around corners’ and recommend adequate coverage.  If you have questions, contact the seasoned professionals at ACBI.

Research Shows Decline in Retirement Confidence among Baby Boomers

Researchers recently found that the Baby Boomers generation is showing a lack of confidence regarding retirement plans. They noted that this trend started in 2011 when they began tracking this group’s views and expectations. Between the two points in time, that generation’s confidence dropped from nearly 45 percent to 35 percent. Although their subjects’ confidence keeps falling, researchers said there were some improvements with important issues such as the number of people who were saving for retirement and the total amount of their savings. In addition to that, they said this generation also showed a great interest in setting savings goals and target retirement ages.

Experts said that one of the most notable findings in their research was the declining number of people who were unsure about what age they would retire. The number decreased to half of what it originally was, and researchers said their findings showed people were retiring later in life. However, they were pleased to see that their survey subjects were looking at the most important elements of retirement and taking steps to develop plans of action as well as looking at retirement more realistically.

Although this generation’s economic outlook is not good, the people are showing hope that their finances will recover and improve. More than 40 percent of participants said they expected improvements within five years, which was up from slightly more than 30 percent one year prior to that. Researchers also found that about 25 percent of participants put off plans to retire. Nearly 30 percent said they would retire after reaching the age of 70. About 10 percent had already reported withdrawing money from retirement plans within the last year. Another 80 percent said they had retirement savings accounts. Nearly 50 percent who had savings accounts had more than $250,000 set aside.

More than 50 percent of Baby Boomers reported having a savings goal, which was a 50 percent increase from the prior year’s tally. From the amount of people with retirement savings goals, more than 75 percent were factoring in health care costs. About 75 percent of this generation said tax deferral was important for retirement investments. Slightly less than 40 percent said they would not be as likely to save if there were no tax incentives or if tax incentives were reduced. Those who use the services of financial advisers are two times as likely to be confident about retirement planning as those who do their own planning.

The survey was based on 800 participants who were between the ages of 51 and 67. While the results showed that seniors improved in this area, it is still important for everyone to ensure they are adequately prepared for retirement. The first step is developing a solid plan, so contact ACBI to discuss any concerns.

What Employers Need to Know about Employee Theft Protection

Many business owners are aware that employee theft numbers are rising. However, the statistics are much more alarming than most think. The Chamber of Commerce reported that $50 billion was spent annually because of fraud and theft committed by workers. They also reported about 20 percent of all businesses that fail do so because of internal fraud and theft. In a research report about loss prevention via internal methods, researchers said companies could lose between one and two percent of sales due to employees’ internal crimes.
Employers often wonder why their workers turn on them when these workers must rely on them for jobs and income. One of the reasons that employees behave this way may be that they feel overwhelmed with personal debts. For example, an employee with tremendous credit card debt who does not know how he or she will pay it may be more likely to try to steal or commit fraud. Credit card companies are also struggling to get past consumer debt and recently raised their required monthly payments. This practice will also help decrease total interest and help people pay off their debts faster, but many people are still unable to afford that extra amount. Since the new policy came behind rising interest rates and higher energy costs, it has hit consumers hard. Many people became vulnerable to payoff schemes and became anxious about their debts.
There are some employees who harbor grudges against employers due to premium increases for group health coverage. If their company is freezing pension plans, many employees will be outraged. When this feeling is compounded by the feeling of not being paid based on individual worth, the result is employees who are more than willing to steal or commit fraud. Some people may think their commercial property policies offer business protection from employee theft, but this is not the case. Commercial property insurance in general is written to cover most theft types. This includes inventory. Securities and cash are not considered property, so they are not included in covered items. For this reason, it is smart to buy an employee theft policy. This type of policy will cover money stolen outside or inside the premises of the business.
Under this type of policy, employee benefit plans may also be covered. Employers are required by the Employee Retirement Income Security Act to keep insurance equal to 10 percent of administered funds. The minimum ERISA amount required is $1,000, and the maximum required amount is $500,000. Employee theft policies may also include profit sharing plans, 401(k) plans, medical, dental, life, vision, pension plans and disability coverage. People who are in charge of administering employee benefit plans or welfare are required by ERISA to be bonded. Employee theft policies will satisfy requirements for this, but each plan must be connected to the insured name listed on a policy for coverage to be effective.



Electronic Delivery of your Insurance Policy

Whether or not you have already received any of your policies via email in recent years, you will see more and more of your insurance documents delivered electronically, in most cases in a PDF file format. As insurance companies update their policy delivery procedures, they are updating their technology so that policies are delivered electronically and most have already implemented this. There are several different methods of electronic delivery and the best news is you are getting your policy faster than ever.

The current trend of electronic delivery is through an email alert advising you of a new policy, a renewal or any updates. You would then log into your account online and retrieve your documents. Another method is that some companies are delivering this to the insurance agency, then the agency is turning around and delivering this to you as an email attachment. If you ever have a problem with retrieving your documents, you should immediately contact your agency. If you don’t already receive your policy electronically, it may be available on demand from your agency, and the best thing to do is to call your agency and inquire if the policy can be delivered electronically. Finally, some carriers give you the option; you can either go on their website to find out what the procedures are, or you can contact your agency.

When you get your policy, the best options are to either save your policy on your computer or save it into an online cloud file account. If you have a backup service for your computer, saving on your computer may be fine. If you don’t have a backup service, you may want to consider getting a Google Docs, a or Dropbox account. Many online document storage services offer free accounts for the first so many gigabytes of storage. In addition, since many companies are giving you access online to these accounts, as long as you have your user name and password you should have access to your policy. Nevertheless, it’s always a good idea to download them and save these on your system.

Online document delivery has been the trend for delivery in recent years for banking, financial brokerages, and delivery of billing statements and is now the trend for the delivery of insurance documents. While the available technology is the driving force behind this, it is also a green business practice that saves paper and energy. After twenty years since the internet has become commercialized, we continue to see more and more utilization of the benefits that it provides.  ACBI can deliver your policy through mail, electronically or on disc.  Call our office with any questions at 203-259-7580.

Tips for Business Owners to Prevent Burglaries

About 90 percent of preventing burglaries consists of physical security measures. If a business or business complex is locked, it is harder for criminals to enter the property. They are less attracted to it because of the difficulty of breaking in, the noise they may cause, the time it takes to break in and the likelihood of getting caught. In most cases, burglars will move on and look for an easier target. By thinking like criminals would, business owners can go over the details of their businesses and look for any possibilities of easy entrances or other opportunities for criminals. To improve the chances of finding any weaknesses, go over the blueprints physically. Also, follow these tips.

Use deadbolt locks. For all entrance locks, use deadbolts. This includes gates as well as doors. Make sure they are double cylinder and have movable collars with the ability to recess into the door. There should be a throw of at least one inch that contains an insert with hardened steel, and a latch guard should protect it. For current safety requirements, check with the local fire department.

Use steel padlocks. When it is necessary to use padlocks, make sure they are made of case hardened steel. The locks should always be locked and should be mounted on bolted hasps. This will help prevent exchange. If there are serial numbers, scratch them off with a file so burglars cannot have duplicate keys made.

Lock the windows. Many people overlook the windows, but they should always be locked. Use secure locks and burglar-resistant glass if possible.

Use solid doors. Make sure all doors are made of solid materials. They should be secured with heavy crossbars and lining made of metal. Door jams should be solid, and any hinges that are exposed must be pinned to keep them from being removed.

Keep good visibility. Make sure the windows are clean and not obstructed. If there are any expensive items, keep them away from windows when the business is closed.

Optimize the lights. There should be optimum visibility inside and outside of the business. It is best to install vandal-proof protection over the lights. Ensure the whole perimeter of the property is well lit. If there are cameras, this is especially important as most do not have the best display quality at night.

Keep the cash register safe. This should be kept in plain sight. If it is visible from outside, make sure it is empty when leaving, and leave it open so would-be burglars know it is empty.

Use an alarm system. Have it installed by a professional monitoring company. Update and check the system regularly, and be sure to note its presence with signs on the property.

401(k)s for the Small Business Owner

Businesses have to compete for talent. Even in down economies, the best employees always have options. One of the things employers must do to keep their best workers is offer them a good, robust retirement plan. That’s where the 401(k) comes in:

The 401(k) is a defined contribution pension plan that allows both employee and employer contributions. By offering a 401(k) plan to employees, you as the employer can provide a powerful retirement benefit at a fraction of the cost of funding a traditional defined benefit plan. Beyond a few basic administrative and setup costs, your only ongoing costs as an employer generally consist of whatever matching contributions you choose to make.

For tax year 2014, qualified employees may contribute up to $17,500. Those aged 50 and older can make additional “catch-up” contributions of $5,500. These limits are much larger than those available for IRAs and traditional IRAs, therefore allowing participants to set aside more money on a tax-advantaged basis than they otherwise could manage on their own. *

The Tax Advantage

Contributions to 401(k) plans are made pre-tax via salary deferral. Balances grow tax-deferred. There are no income taxes due on interest or dividends, and no capital gains taxes due on growth. Money is only taxed upon withdrawal. If the participant makes withdrawals prior to age 59½ the IRS generally charges a 10 percent excise tax. The employer must also withhold 20 percent of the amount withdrawn against taxes.

*Note: In some circumstances, the allowable contributions of highly-compensated employees may be lower – especially if management does not get adequate participation among rank and file employees. Congress designed the 401(k) to benefit all employees – not to be a private preserve for management. It is therefore in the best interests of management to encourage broad participation in the plan. The more workers participate, the more highly-compensated management and owners can set aside within their own 401(k) accounts.

Sole Proprietorships and Couples

If you are the sole employee of your corporation or LLC, or you own and operate your company with your spouse, you may consider the Solo 401(k). These are specially designed to be realistic, workable and efficient solutions for ultra-small businesses with few or no employees other than the owner. Sometimes called the “Individual 401(k), or “One-Participant 401(k)s.”

Like other 401(k) plans, these plans allow business owners to set aside up to $17,500 of their own salary via salary deferral as employees.

Additionally, the employer can contribute an additional 25 percent of compensation as defined by the plan.

Self-Employed Individuals

It is also possible for self-employed individuals to create a 401(k) plan to cover themselves as well. In this case, however, you must also calculate the effect of self-employment tax on your allowable contributions.

For self-employed individuals, your compensation for the purposes of calculating maximum allowable contributions is your net self-employment earnings after subtracting your contributions for yourself and one-half of your self-employment tax for the year.

For more information on 401(k) plans for small businesses, including Solo 401(k)s, see IRS Publication 560 – Retirement Plans for Small Business

10 Ways Commercial Property Owners Can Protect Vacant Buildings

Vacant buildings are common products of a slow economy. Researchers said that recent statistics only show about a one percent decrease in vacant buildings in recent years. If buildings do not have any personal property or occupants in them, they are more likely to face several types of problems. Every year, there are over 30,000 fires in vacant buildings, and many of these result in severe injuries or deaths. They also cost well over $640 million in property damage. Most vacant buildings do not have good security or maintenance. This can lead to the following types of problems:

– Copper piping and other valuable fixtures inside the building may attract thieves.

– Buildings become vandalism targets when there is no security on the premises. These buildings often end up with graffiti on their walls and broken windows.

– Many young people are attracted to vacant buildings to use as places for parties or drug use. They are also common places for homeless people or drug dealers.

– Groundwater and soil may become contaminated by toxic substances leaking from a vacant building.

– Fires are common due to smoking trespassers, arsonists, decayed wiring and drug production. To complicate the matter, the automatic sprinkler system may be turned off. This makes it easier for fires to spread. With a lack of security, early detection is nearly impossible.

No building owner wants to be fined for hazardous substances leaking or for a fire that could have been prevented. Building owners can take several steps to protect their vacant properties and make them less likely to be destroyed. The following are some useful tips:

– The exterior of the building should be cleared of cardboard, paper, brush and scrap wood.

– Stop by the property at least once each week. Another option for owners who live out of state is to hire a property management company to care for the building.

– Keep parking areas and sidewalks in good condition, and they should be cleared of ice or snow during the winter.

– If there are any toxic substances that may cause contamination and might harm people or emergency responders, they should be removed.

– Put up obstacles to ensure pedestrians and vehicles stay out of the parking area.

– Pay security guards to monitor the building overnight, and keep exterior lights turned on during the night.

– Make sure the electricity for exit signs and emergency lighting is always on.

– To avoid bursting pipes, make sure the heat stays on or the plumbing system is drained. There should be a minimum temperature set to keep automatic sprinkler systems safe.

– Turn off the utilities except when needed to power alarm systems and lighting.

– Fire detection devices should be linked to a central monitoring service and maintained well.

If a building is almost 70 percent vacant for longer than 60 days, it may lose some vital insurance coverage. Standard commercial policies lower loss payments by 15 percent for the majority of losses. This does not include water damage, theft, vandalism or breaking glass. The building owner may opt to buy a vacancy permit for an additional premium. This permit replenishes some or all of the coverage for a specified time period. Vacancy changes coverage is also available, and this form of insurance will lower the minimum occupancy the building must have before it can be considered vacant in comparison with the standard percentage. To learn more about this coverage option and how to add it, contact ACBI.

IRS Announces More Generous Retirement Contribution Limits for 2015

These days, it’s pretty rare that taxpayers get a break. But they’re getting one for tax year 2015: The Internal Revenue Service announced a series of higher allowable contribution limits and relaxed income rules that will allow many taxpayers to set aside more money for retirement – on a tax-advantaged basis.

Employer-Sponsored Plans

The IRS is raising elective contribution limits for employee participants in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan. Specifically, allowable employee contributions, via salary deferral, will increase from $17,500 to $18,000 as of 2015. Additionally, allowable ‘catch-up’ contribution limits for those plan participants ages 50 and older are also increased from $5,500 to $6,000.

Additionally, total contributions – including the employer match, to a defined contribution plan, such as the SEP IRA, are increasing to $53,000 in 2015, up from $52,000 this year, or 20 percent of compensation (for self-employed individuals) or 25 percent of compensation (for employees), whichever is less. (The difference is due to the effect of the self-employment tax on taxable income.)

The total dollar amount that can be considered when calculating allowable employer-sponsored defined contribution retirement plans is also increasing next year, from $260,000 to $265,000.


Contribution limits for IRAs will remain unchanged for 2015. However, the IRS is increasing the thresholds beyond which IRA contributions become non-deductible, as follows:

For those who participate in an employer’s plan

Deductions for IRA contributions for individuals and couples will be phased out after AGI (adjusted gross income) reaches $61,000, and gradually phases out until AGI reaches $71,000. That is a $1,000 increase from last year. For couples filing a joint return, the threshold rises by $2,000; allowable contributions phase out between $98,000 to $118,000 AGI. At higher levels, you cannot deduct your contributions. However, you can still contribute to an IRA on a non-deductible basis.

Consult your tax advisor for specific advice on how this may affect you.

For those not covered by a workplace plan 

For singles, Deductions are phased out when the couple’s AGI reaches $183,000 to $193,000, also an increase of $2,000 over 2014.

Roth IRA Income Limits Increasing

Income limits on Roth IRA contributions are going up in 2015, to the $116,000 to $131,000 range (for single taxpayers and heads of households, and to the $183,000-193,000 range for married couples. Both are increases of $2,000 over the previous year. If your income falls below these ranges, you can contribute up to $5,500 ($6,500 for those over 50). After that, your allowable contribution gradually falls as your AGI increases. Your allowable contribution reaches zero when it gets to the top of these ranges.

Retirement Savings Credit

The government is also loosening restrictions on qualifying for the Retirement Savings Credit – an incentive designed to encourage lower-income individuals to save money for their retirement security.

Here are the new AGI limits to qualify:

  • Married couples (filing jointly) $61,000
  • Heads of household: $45,750
  • Single taxpayers (and married couples filing separately): 30,500.

The changes come about as a result of the annual cost of living review that affects a wide variety of federal benefits, such as military base pay and Social Security benefits.

What Business Owners Need to Know to Classify Employees and Independent Contractors

Employees and independent contractors are different, so it is important for employers to be clear about the difference between the two. This will help them determine what to do when hiring people to help, and it will also affect how they withhold taxes to avoid legal trouble.

Independent Contractors Independent contractors have their own employees and usually have their own business name. They typically have a separate checking account for business, and they advertise their own business services. When work is completed, they normally send an invoice or have an agreement for payment. Independent contractors have their own hours, tools and clients. They keep their own business records as well.

Employees Employees are hired by a company to work for only that employer unless otherwise agreed. For example, some full-time employees may have a part-time weekend job elsewhere that does not interfere with their commitment to their full-time employer. Employees’ duties and assignments are controlled by the employer or supervisors, and they are provided with training from the employer for the tasks they need to complete. Small businesses often depend on independent contractors as workers. For small business owners, there are several benefits to using this approach. They do not have to spend as much for labor costs, their liabilities are reduced considerably and this gives business owners more flexibility for firing or hiring.

Classification Considerations Classifying an individual incorrectly as an independent contractor may have several legal consequences that are costly. If an independent contractor meets the definition of an employee, the business owner may have to reimburse that person for wages and overtime that would normally have been paid to them by the Fair Labor Standards Act. The business owner may also have to provide health insurance, retirement or other benefits normally offered to regular employees. Paying back taxes and other penalties would also be necessary, and workers’ compensation would have to be paid to any injured individuals who met the criteria for being employees instead of independent contractors.

Tax Considerations The Internal Revenue Service provides information on their site for companies hiring independent contractors and employees. This information is to teach them about tax implications of various scenarios. Site visitors can fill out forms to request that the IRS reviews their workers’ statuses and to provide additional resources. There are no one-size-fits-all tests to determine if a worker is an employee or independent contractor. However, the following considerations are useful in helping classify them:

– The permanency of the work relationship.

– The extent to which services provided are an integral part of the employer’s business.

– The amount of initiative in market competition determining the worker’s success.

– The worker’s investment in equipment and facilities.

– The worker’s opportunities for loss and profit.

– The degree of independent business operation and organization.

– The degree of control by the business owner.

Whether a person is considered an employee or an independent contractor will depend on the business owner’s amount of control over the workload and the individual. For more information about this topic and how to classify workers correctly or to make sure they are properly insured, contact ACBI.

What E-Visits are and Why They are Becoming so Popular

Some health insurers are now letting people be seen online for certain ailments as a way to solve the problem of overcrowded hospitals and doctor clinics. Patients who are insured under participating companies are able to have an e-visit to give the doctor a chance to decide whether in-person medical care is necessary or not. Insurance companies have been partnering with other companies that provide these e-visit services. During an e-visit in some states, a doctor may prescribe medications for smaller issues such as chronic pain or infections. There are many patients who have busy schedules and limited time to see a doctor, so they like the new e-visit option. However, physicians point out that this new idea may heighten the possibility of a wrong diagnosis. They explained that some complaints could indicate a minor issue posing no danger or a serious issue that could be life threatening.

Doctors are not able to look down a person’s throat or in the individual’s ears for signs of other issues that may indicate a need for antibiotics or certain treatments. Some experts said they felt confident that the physicians in their clinics had the necessary skills to determine when in-person care was needed and when certain ailments could be taken care of with minor steps or medications. One physician pointed out that online services can cut down on many expenses for patients, medical professionals and insurers. It also gives isolated patients easier access to medical services and would cut down on overcrowding in emergency rooms.

This debate is one that has received input from the country’s top medical associations. One major association recently provided guidelines to help mold the development of telemedicine. In addition to this, state licensing boards have drafted policies of their own, and top health insurers are doing their part to contribute to the growth of virtual medical care.

Researchers said many people are comfortable seeing a doctor online, so it will be a process more people will learn to understand and accept over time. Nearly every person has at least one story of having to go to an emergency room or urgent care clinic for an issue that is not life threatening but still having to wait a long time to be seen. Such people are the biggest proponents of this new virtual care. Another benefit is that people who are sick on or near holidays will not have to leave the house to speak with a physician, so minor recurring issues that they can identify themselves are easy to take care of during busy times.

Patients who have health plans with high deductibles also like this option because it costs less. An e-visit costs an average of $50, but a typical ER visit is upward of $1,200. There are many more benefits to using telemedicine and e-visits. As time passes, consumers can expect to see more insurers adding this option and routine or smaller issues, putting a smaller dent in their wallets as well. To learn more about options, contact ACBI.