The Framing Material That Can Lower Your Insurance Premiums

At times, mid-rise and multi-family buildings constructed with wood framing come with an attractive initial price tag — but also an additional amount of risk, particularly during construction. In fact, the Steel Framing Industry Association has catalogued a series of recent catastrophic fires destroying multi-story, wood-frame building complexes in the United States and Canada. These examples highlight just how devastating wood framing is when it comes to fire-related and other losses.

Therefore, framing with wood may actually come at a higher initial cost to owners, while cold-formed steel’s unique material characteristics can result in significant savings on:

Builders’ risk and construction insurance
Ownership insurance costs including general liability
Worker’s compensation
Commercial property insurance

Various forms of insurance are necessary on construction steel forming machine projects and completed buildings (with costs being higher for commercial and mid-rise properties). However, cold-formed steel (CFS) framing can help pare down these costs for builders, developers, and owners. Here’s how.

Lower Risk of Fire
To start, steel can’t burn. It cannot initiate or contribute to a fire. It melts at temperatures far exceeding those of a typical building fire. As a result, CFS-framed structures tend to have less chance of fire and, in the event of a fire, have less internal damage. And just as important, CFS-framed construction will likely cause less damage to adjacent properties.

Because of the non-combustibility of CFS, builders pay lower builders risk insurance premiums for CFS than for wood framing. And since panelized cold-formed steel framed projects often have accelerated construction schedules, employees may be required to be on the jobsite for less time, which can lower premiums for worker’s compensation policies.

One example how CFS can help lower insurance costs is the case of a 4-story, 400-unit hotel built over 24 months in Ohio. With CFS, the builder’s insurance was $360,000, but had the hotel been built with wood, the same level of coverage would have cost $1.6 million. The insurance savings with CFS was over $1.2 million.

Reduced Legal Liability
In addition to the cost of insuring their properties, owners also need to consider the legal liability that may result from construction incidents and building fire, which can spread to adjacent properties. The cascading lawsuits could be crippling in terms of costs to owners. That kind of liability is a great concern for builders and owners of mid-rise and commercial buildings — considering these types of buildings are often built in urban in-fill sites, where buildings are close in proximity. For example, a 2015 construction fire at an apartment building in Edgewater, NJ, displaced hundreds of people from neighboring buildings.

Lawsuits were filed against the building owner, citing the known risk of fire associated with wood construction. As reported by CBS, “There have been no allegations of building code violations at the apartment complex, but fire officials and lawmakers have questioned the use of lightweight wood that many say is more flammable than other types of wood.”

In short, commercial and multi-family building projects require a range of insurance products, and CFS often proves to be a more cost-effective framing option through the entire lifecycle of a building. If a CFS project can get qualified as “noncombustible” by an insurance underwriter, that property may further qualify for discounts on other insurance products.

Insurance Products for CFS Construction

Because CFS has a demonstrated record as a safer, more dependable alternative to other framing materials, insurance companies have responded with products that reward the use of CFS. The following are two major CFS-based insurance programs:

STEEL Advantage Insurance Program

CFS is at the core of STEEL Advantage. The idea is, because CFS metal roofing machine is noncombustible, the risk of fire is greatly reduced compared to other construction materials, which should lead to lower claims over the life of the building. This program was launched by the Steel Framing Alliance and DiBuduo & DeFendis Insurance Brokers, LLC (a member of Assurex Global), and provides builders who use steel framing with as much as a 43 percent discount on a broad range of insurance products, making steel framing even more competitive with other construction materials.

Zurich Builders Risk Plan
The US Assure Builders Risk Plan, insured by Zurich American Insurance Co., is designed specifically for CFS-framed construction projects. New consistent classification of steel framing as non-combustible can reduce premiums when compared to combustible frame construction.

Learn more about these programs on the Steel Framing Alliance website.

As insurance consultant Charles Specht stated in Multi-Housing News, “There can be substantial savings associated with noncombustible materials, and they [owners] could be selling themselves short if they’re not exploring the impact of lower insurance costs. As the market adjusts to the upswing in major claims from the recent fires, this could be even more important in the future.”

If you have further questions about insurance costs or choosing a framing material for your next project, request complimentary project assistance from our team of experts.