Anyone who invests in commercial property or simply purchases a commercial space for personal or professional use hopes that the property at least maintains its value so that they don’t take a loss in the event that they ever choose to sell. However, as we’ve seen in recent decades, property values have continued to climb, and anyone who has bought a home or commercial space in the last decade or two is likely sitting on a property that is appraised at much more than the original purchase price.
It’s great that your property has gone up in value, but how does a major value increase affect your insurance coverage? More specifically, how does it affect your title insurance coverage? We explore how commercial property value increases can impact your title insurance coverage and what steps you may need to take if your property has become significantly more valuable over the years.
Commercial Property Value Changes And Your Title Insurance Policy
Whether it’s because of major improvements that you’ve made to the space or a little good fortune with the economy and real estate prices, there’s a good possibility that your commercial property is worth a little or a lot more than what you originally purchased it for. While a property value increase does provide you with a little more financial security, that’s only the case if you insure it properly.
With a standard insurance policy, you’ll pay a premium throughout the year that provides coverage in the event of an event like a fire, flooding or similar unexpected disaster. Your policy can change from year to year based on your needs and the value of property, and your insurance adjuster will work with you to determine how much coverage you need. These policies incorporate property value increases on a regular basis, so it’s more likely that this policy accounts for the added value in your latest purchase.
The same cannot be said for your title insurance policy. As we’ve talked about on the blog in the past, commercial title insurance provides you and your lender with financial protection against an unexpected claim on your property by someone else. If that party actually has a legitimate claim to your property, you may lose the property and be out a lot of cash, so a commercial title insurance policy is highly recommended and oftentimes required in order to move forward with a purchase.
One of the best things about a commercial title insurance policy is that it is a one-time fee. You’re not going to have to pay an annual fee for this coverage; one payment is all you need to have title coverage for as long as you own the property. However, if the value of your property significantly increases, you may want to approach your commercial title insurance provider about increasing your coverage.
If your commercial property has increased in value due to your hard work or other economic factors, it may be worth the peace of mind to have a conversation with your title insurance provider about adding additional coverage to account for this value increase. Again, it will only be a one-time fee for this increase.
To learn more about adding additional coverage to your commercial title insurance policy as a result of property value increases, or for assistance with another aspect of commercial real estate, reach out to the team at Commercial Partners today at (612) 337-2470.