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You’ve closed on your business loan for your new business location. Now it is time to get the property insured. To do so, you will need to buy a policy from an insurance company. The company will evaluate your new purchase and decide if they are willing to provide you with an insurance policy. 

The insurer typically makes their underwriting decisions based on COPE data. Understanding COPE may be a little tricky to understand for the general public. That’s why in this article, we will discuss in detail what COPE data is, and what you can expect from your insurance underwriting process.

business Risk assessment concept

What is the Insurance Underwriting Process?

Insurance companies provide varying rates, which makes it a good idea to shop around to find the best coverage and the lowest rate. Once you’ve chosen the company you are most satisfied with, they will begin the underwriting process to ensure you are eligible for an insurance policy. 

The insurance underwriting process includes the identification, classification, and analysis of risks before deciding to insure your property. He or she will use COPE to identify those possible dangers that could cause them to pay out an insurance claim you make. 

  • Identification: The insurance application will ask for the basic information required by underwriters. You should have ready an itemized list of any business property you want to insure, like furniture, computers, etc. You will need to disclose the physical address of your property, whether it is owned or leased, building information (things like construction and year built), safety features (fire extinguishers, sprinkler systems, etc.), and any updates in the plumbing, heating, roofing, and wiring that have been done.


  • Classification: After they’ve gotten all your information down, insurers will calculate a Commercial Property Insurance Rating that is specific to the building or property you want to insure. This will either be a class rating or a specific rating. The class rating is a more general rating in which other properties with similar characteristics are put in the same class. These properties will all have the same insurance rate. Typically these properties will have less than 25,000 sq. ft., won’t have a sprinkler system, are not fire resistant, and won’t be used for manufacturing. But if your building is outside of these parameters, there will be a specific, customized rating calculated based on its characteristics.


  • Analysis of risk: To calculate your property’s rating, the insurer must pay attention to COPE data. COPE data is built into the underwriters’ valuation models that will help them predict the likelihood they could lose money due to claims made on the property. If the property poses too much of a risk for them to insure, they can refuse to give you a policy. 

What is COPE Data?

COPE data outlines the possible risks that an organization could face when catastrophic events occur. The amount of loss that the organization may incur in these circumstances helps property insurance underwriters determine whether to offer an insurance policy. 

COPE is an acronym for the set of factors the underwriter focuses on. COPE stands for construction, occupancy, protection and exposure. Each of these factors stands for a different type of risk that can alter the valuation model differently. 


Why is gathering this information so important for business owners?

  • Allows underwriters to make accurate and cost-effective policy decisions
  • Possibly leads to lower rates if enough data is given since many insurers assume the worst if the data is not differentiated
  • Collecting the data can help an organization better prepare for disaster by reducing the possible hazards, increasing functionality and risk management 
  • Can give you a headstart on your asset management plan

Let’s take a close look at each risk of the COPE acronym. 


Each of these factors will be analyzed by a professional underwriter to determine your eligibility for a policy.


Some buildings are stronger than others. Insurance underwriters must evaluate all aspects of the building’s construction to accurately define what they can insure. If the building is constructed well, it will incur less property risk and thus will be a more affordable policy.

There is also the possibility the insurer will not approve your insurance request solely based on poor-quality construction. Here are the main elements of construction the insurer will look at:

  • Materials: The materials used to construct the building can indicate how soon they will start to break down, experience wear and tear, how much fire protection they give, etc. Low-quality building materials can pose a risk of deterioration of the building, which can deter an insurer from wanting to insure the property. Those buildings with steel frames are considered more quality than wooden ones, as wood will degrade faster over time and is more susceptible to fire damage. Additionally, a brick or cinder block exterior is considered better constructed than stucco siding. The Insurance Services Office (ISO) outlines six construction classifications for buildings based on how combustible or damageable their materials are. Construction classes go from numbers 1 to 6, and the lower the number, the more danger the structure has of being damaged by fire.


  • Building location: Where the building is located can also be a red flag for an insurer. For example, if the building is located in a flood plain or an area known for sinking sand, this poses more danger for the insurer. Is the building located in a hurricane or tornado hotspot? This is another potential property risk. 


  • Building age: Newly constructed properties are considered less dangerous to insure as they are often built with updated systems in them. Older commercial properties are more likely to have a major system malfunction that can lead to a possible claim.  For example, newer homes are less likely to have harmful lead-based paint or copper pipes. Newer properties are also more likely to be built to code and be energy efficient. There may be laws and ordinances that have been updated or enacted since an older building’s original construction, increasing the likelihood that the systems inside it aren’t up to snuff. Underwriters will want to know when all the last updates to the systems were, who did them, and the extent of the updates.


  • System quality: If the property has poor quality systems, such as funky electrical wiring or plumbing issues, this poses more risk for the insurer to take on. 


  • Square footage: How big the property is will also affect the amount of property risk. Underwriters compare the building’s maximum possible loss (MPL) with its probable maximum loss (PML). The bigger the building, the less likely the whole thing will be destroyed in one claim. Therefore the PML decreases as the building size increases if there is significant protection of the building. 


Next, the insurers will look at who occupies the building or how it is being used. Some occupants may perform more perilous activities. For example, a restaurant is more likely to experience a fire than a gym. Whether it be used for offices, manufacturing, or anything in between, the use will indicate their levels of danger. 

Additionally, a space that occupies a few workers will be less of a risk than the same kind of operation with hundreds of workers. The insurers will also take note of whether the occupants are the owners or renters. Commercial tenants renting or leasing a property need to pay for their belongings and contents insurance.

This can include any fixtures, fittings, or improvements they have added. Here are the medium-high risk kinds of occupants as regarded by insurers: 

  • Vacant or unoccupied: These properties have an increased likelihood of damage caused by vandalism, more potential for loss in case of water or fire damage since no one will respond, and the possibility of squatters moving in. 
  • Cafes or restaurants: As we’ve mentioned, occupants with cooking facilities represent a higher fire danger. As a result, insurers will usually question if there are deep fryers, how often the flues are cleaned, and what fire protection measures are available. 
  • Manufacturing operations: These properties can pose a high risk due to possible hazardous materials being stored and used on-site. 
  • Storage facilities: The willingness to insure storage facilities can vary. Most insurers find them to be high risk due to the possibility of hazardous materials stored on the property. 
  • Dry cleaners or laundromats: These properties are associated with highly flammable materials, and toxic chemicals, and pose a higher danger of injury due to the risk of slips and falls on wet floors. 
  • Tattoo parlors: Tattooists are in high danger of malicious damage claims, a very difficult risk to cover. 

Building Inspector completing an inspection form on clipboard


In case disaster does strike, what does the building have in forms of protection? These protections will also be factored into the insurers’ assessment. To guarantee themselves an insurance policy, it can be helpful for an owner to get protection for the following common insurance claims: 

  • Fire: A working sprinkler system is imperative. Additionally, fire barriers, firewalls, fire partitions, and smoke barriers can promote the compartmentation of a fire. Are the fire barriers made of concrete, combination wood, gypsum, or masonry?


  • Flood: Insurers will look for flood vents in foundation walls, garages, and other enclosed areas that allow water to flow through and drain out. These things help lower the danger of structural damage from flooding. Some other helpful things would be that the building is raised on stilts, flood-proofing coatings and sealants, raised electrical outlets and switches and checked valves on pipes to prevent sewage system flooding.


  • Theft: Buildings will pose less possibility of theft if they have things like third-party monitored alarms, video surveillance, double-key deadbolts, fences, motion sensor lighting, a safe for valuables, and reinforced windows with safety glass or metal bars. 

Additionally, the insurer will look at city infrastructure concerning the building. For instance, is there a fire department or police department close by? If a fire station is not in the immediate vicinity, this puts the property in more danger of being demolished by flames. Additionally, not being close to a police station can add more risk of theft.

Underwriters will also ask if there is enough water pressure for sprinklers and fire hydrants to fight a fire. And if the property is near any body of water, has the city introduced terrace slopes, building alluviums, dykes, dams, reservoirs, or holding tanks to keep flooding at bay?

How important the protection of the building is will also depend on the previous two factors. Both the construction and occupancy of the building will also determine how much protection the building needs. For instance, if the property is located in the middle of the desert, it will likely not need as much flood protection as a property by the ocean. Also, a property occupied by a restaurant will need more fire safety precautions than an office. 


We’ve already touched on the last risk factor in the acronym, exposure. Exposure refers to the many external dangers that could potentially cause damage to the insured building. These are the uncontrollable hazards that property owners take when purchasing their properties.

Therefore, buyers need to carefully select their property and look at all potential dangers before they buy. If they buy in hazardous areas, it is possible they won’t be able to secure quality insurance coverage. Be cautious before buying property: 

  • In a flood zone
  • In a high-risk wildfire area
  • Near petrochemical plants or facilities
  • In a high-risk area for wind or water damage
  • In an area exposed to frequent earthquakes

Insurance is Risky Business

To assess the premiums they will give the insured, underwriters must undergo the insurance underwriting process. This includes the identification, classification, and analysis of risks. Risk analysis is based on COPE data. Underwriters will look at the building materials, location, building age, system quality, and square footage of the property’s construction.

Then they will examine who the occupants are and if they pose much risk. Next, the insurers will assess if the property is well-protected from fire, flood, and theft among other possible dangers. Lastly, they will determine how much exposure the property has to external risk factors. 

After assessing all of these factors, you will be either approved or denied your insurance policy. Questions on how to get started in the insurance process? Contact us and we’ll direct you to the next steps!

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