Across the country, businesses are facing a difficult commercial insurance market, especially when it comes to property coverage. One of the biggest changes many business owners are seeing is a sharp increase in commercial property deductibles.
As extreme heat, wildfire activity, and catastrophic weather events continue to increase, insurance carriers are adjusting how they manage risk. For many businesses, that means higher out-of-pocket costs when claims occur.
Understanding why deductibles are increasing and what businesses can do about it can help owners better prepare for renewal conversations and avoid unexpected surprises after a loss.
Why Insurance Carriers Are Raising Deductibles
Insurance companies have experienced substantial losses over the past several years due to:
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Wildfires
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Extreme heat events
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Severe storms
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Inflation in construction costs
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Supply chain delays
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Larger property claims
Wildfires in particular have become a major concern in many western states. Even businesses located miles away from active fire zones can still experience smoke damage, power interruptions, evacuation issues, or supply chain disruptions.
As claim severity continues to rise, carriers are increasing deductibles to help reduce overall exposure and encourage businesses to take a more active role in risk management.
What Businesses Are Seeing at Renewal
Many business owners are surprised when renewal offers include:
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Higher flat deductibles
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Percentage-based deductibles
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Separate wildfire deductibles
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Wind or catastrophe deductibles
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Reduced carrier appetite in high-risk areas
For example, a business that previously had a $2,500 property deductible may now be offered:
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A $10,000 deductible
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A 1% or 2% building value deductible
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Special deductibles tied specifically to wildfire or catastrophic losses
For larger commercial buildings, percentage deductibles can become significant very quickly.
Extreme Heat Is Increasing Property Risk
While wildfires receive much of the attention, extreme heat itself is also driving insurance losses.
High temperatures can contribute to:
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HVAC system failures
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Roof deterioration
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Electrical equipment strain
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Refrigeration breakdowns
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Increased fire risk
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Employee safety issues
For businesses that rely on temperature-sensitive operations, even short interruptions can lead to major financial losses.
Industries especially impacted include:
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Restaurants
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Warehouses
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Manufacturing operations
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Retail businesses
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Food distribution companies
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Hospitality businesses
As temperatures rise, carriers are scrutinizing building maintenance, aging infrastructure, and loss prevention practices more closely than ever before.
Wildfire Exposure Is Expanding Beyond Traditional Risk Areas
One major shift in the insurance market is that wildfire underwriting is no longer limited to heavily wooded rural regions.
Carriers now evaluate:
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Brush proximity
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Regional wildfire scoring models
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Nearby vegetation density
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Fire department access
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Roof materials
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Building age and updates
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Community fire protection measures
Even urban and suburban businesses may now face increased underwriting scrutiny depending on location and environmental conditions.
Some carriers are also using advanced satellite imagery and predictive modeling to evaluate wildfire exposure before offering terms.
What Businesses Can Do to Help Control Costs
While businesses cannot control the weather, there are proactive steps that may improve insurability and help reduce underwriting concerns.
Maintain Property and Building Systems
Regular maintenance of roofs, electrical systems, HVAC equipment, and fire suppression systems can help reduce preventable losses.
Create Defensible Space
Businesses in wildfire-prone areas should remove excess vegetation and combustible materials near structures whenever possible.
Document Property Improvements
Upgrades such as new roofing, sprinkler systems, monitored alarms, and electrical updates may help during underwriting reviews.
Review Coverage Before Renewal
Many businesses wait until renewal arrives to discuss coverage changes. Reviewing policies early can create more time to:
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Explore carrier options
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Evaluate deductible strategies
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Address underwriting concerns
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Compare coverage differences
Consider Business Interruption Coverage Carefully
Wildfire and heat-related losses do not always involve direct fire damage. Smoke, utility failures, or mandatory closures can also impact operations.
Businesses should review business income and extra expense coverage limits carefully to avoid gaps.
The Commercial Insurance Market Is Continuing to Evolve
Commercial property insurance is changing rapidly, especially in regions impacted by extreme weather and wildfire activity. Higher deductibles are becoming increasingly common as carriers respond to growing catastrophe exposure and rising claim costs.
For business owners, understanding these trends early can make renewals less stressful and help avoid costly coverage surprises after a loss.
At Empire Insurance Brokers, we help businesses navigate the changing commercial insurance market by reviewing coverage options, identifying potential gaps, and comparing solutions with multiple insurance carriers.
Coming Next in This Series
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Part 2: Why Some Businesses Are Seeing Coverage Restrictions or Non-Renewals
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Part 3: How Wildfire Risk Scores Affect Commercial Insurance Pricing
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Part 4: Business Interruption Risks During Wildfire and Heat Events
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Part 5: Steps Businesses Can Take to Improve Commercial Property Insurability
