comprehensive insurance services
Commercial Property Insurance
Commercial Property Coverage Outline
Property Insurance is any type of insurance that indemnifies an insured party who suffers a financial loss because property has been damaged or destroyed. Property is considered to be any item that has a value. Property can be classified as real property or personal property. Real property is land and the attachments to the land, such as buildings.
Personal Property is all property that is not real property. The Building and Personal Property coverage form is the form used to insure almost all types of commercial property. The insuring agreement in the Building and Personal Property coverage form promises to pay for direct physical loss or damage to covered property at the premises described in the policy when caused by or resulting from a covered cause of loss. The following is a brief outline of coverages and how they are used within the Commercial Building And Personal Property coverage form.
Buildings and Business Personal Property
Coverage for the building includes the building and structures, completed additions to covered buildings, outdoor fixtures, permanently installed fixtures, machinery and equipment. The building material used to maintain and service the insured's premises is also insured. Business Personal Property owned by the insured and used in the insured's business is covered for direct loss or damage. The coverage includes furniture and fixtures, stock, and several other similar business property items when not specifically excluded from coverage. The policy is also designed to protect the insured against loss or damage to the personal property of others while in the insured's care, custody or control.
Coverage Extensions and Additional Coverages
In addition to the limits stated in the Building and Personal Property coverage form, the policy has a coverage extensions section and an additional coverages section. The coverage extensions section provides limited coverage for newly acquired or constructed property, property of others, certain outdoor property, and the cost to research and reconstruct information on destroyed records. When coverage is placed on the all risk form, two additional extensions are added for property in transit and coverage for certain repair costs related to damage caused by water. The two additional extensions are covered by certain perils only. The additional coverage section provides coverage for indirect losses that result from a direct loss. The coverage applies to removal of debris, preservation of property, fire department service charges and pollutant cleanup and removal. The coverage extensions and the additional coverages have limitations and are subject to certain conditions.
Limit of Insurance
The most the insurer will pay for loss or damage in any one occurrence is the limit of insurance stated in the policy declarations.
Deductible
The standard deductible is $250. However, other deductible amounts are available and the deductible applies only once per loss.
Causes of Loss
The term peril is used when discussing losses. A peril is a cause of loss. Basic property insurance policies are written to cover the perils of fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. Other property insurance policies, often referred to as the broad form policy, add coverages for water damage, weight of snow, ice or sleet, breakage of glass and coverage for falling objects. The broadest coverage is the special form, which is best known as the all risk form. All risk covers all causes of loss, except those specifically excluded from coverage. It is possible for a commercial property policy to have more than one cause of loss form.
Replacement Cost and Actual Cash Value
Property can be valued in several different ways. Insurance companies commonly use two approaches to determine value, which also determines how a loss will be paid; the replacement cost method and the actual cash value method. Insurers consider replacement cost of a property item to be the cost to replace it with new property of like kind. Actual cash value is replacement cost, minus the accumulated depreciation for age and condition.
Agreed Value
When the agreed value option is used the coinsurance requirement is removed and the insurer agrees to cover loses for it's agreed value. As an example, the insured has property insured for $100,000 and the agreed value is also $100,000, if a loss occurs, any loss up to $100,000 is covered at 100% When this option is used the insured and the insurance company agree on the value of the property before the policy is issued. This option is usually assigned to one-of-a-kind property.
Coinsurance
Most building and business personal property polices have a coinsurance clause which requires the insured to carry insurance equal to at least a specified percentage of the actual cash value of the property. If a loss occurs, and it is determined that the amount of insurance carried is less than the amount required, a penalty could be placed on the insured.
Inflation Guard
An insured can insure a building for its full value at the beginning of the policy year, but, at the end of the year, it might not be covered for it's full value. This problem can be corrected by adding inflation guard coverage. With inflation guard, the policy limit increases gradually during the policy term so that the total increase amounts to the desired percentage increase at the end of the policy term.
Earthquake Coverage
This endorsement extends your cause of loss to include damage that results directly from an earthquake. Coverage is provided for replacement of buildings only. All earthquake shocks that occur within a 168 hour period (one week) are considered to be a single occurrence. A separate deductible applies and is determined by the value of the insured property.
Business Income Coverage
Business Income is the net profit or loss that would have been earned or incurred if the suspension of the business had not occurred, plus any normal operating expenses that must continue during the suspension of the business. Business Income insurance pays the actual loss of business income sustained by the insured because of a necessary suspension of the insured's operation during the period of restoration following a loss. The suspension must result from direct physical loss or damage to real or personal property. Coverage is provided against the same causes of loss covered under the insured's property policy. Under certain conditions, the policy also provides an extension of coverage for newly acquired property.
The insured's operations are the business activities of the insured, which occur at the location listed in the policy. The period of restoration is the period beginning on the date of the direct loss, and ending when the damaged or destroyed property could have been restored.
The business income and extra expense form provides the following additional coverages:
Extra Expenses
Extra Expenses are any expenses over and above those that would have been incurred during normal operation of the business. Some of the covered extra expenses are; expenses incurred to avoid or minimize the suspension of operations, expense to repair or replace property, and expense paid for overtime work to speed up the restoration of the business.
Civil Authority
Civil Authority is when access to an insured's premises is denied by civil authority as the direct result of damage or destruction of a neighboring or adjacent property belonging to others. If the damage or destruction is caused by a cause of loss covered by the insured's policy, this coverage would apply. The insured's premises would be covered for the loss of income during the period of suspension, up to a maximum of two weeks.
Alterations/New Buildings
Alterations/New Buildings provides coverage for loss of income resulting from a delay in beginning operations. The delay must be the result of damage to new buildings or structures, either completed or under construction. Damage to additions or alterations to existing buildings are also covered. The damage must be the result of a covered cause of loss.
Extended Business Income
This coverage provides the time needed for the insured's former customers to return once the business suspension is over by providing coverage for loss of income until sales return to normal, or up to a maximum of thirty days.
Optional Coverages
Maximum Period of Indemnity
Maximum Period of Indemnity is a restriction of the period of restoration provided under the policy. If this option is selected the insured's loss payment is limited to the lesser of (1) the amount of loss sustained during the 120 days immediately following the loss or (2) the policy limit. The coinsurance requirement does not apply if this option is chosen.
Monthly Limit of Indemnity
Monthly Limit of Indemnity is an option that allows the insured to recover a percentage of the actual policy limit during each thirty day period of interrupted operations. If a loss occurs, payment would be made for the lesser of the actual amount of the loss, or the maximum amount allowed to recover with this option. Under this option, the coinsurance requirement does not apply.
Extended Period of Indemnity
Extended Period of Indemnity is an option that extends the "extended business income coverage" over the standard thirty-day period. The insured can extend the coverage to 60 days, or up to a maximum of 360 days. The selected time would depend on the time the insured estimates it would take for revenues to return to normal after a suspension of the business.
Agreed Value
Agreed Value is an option that requires the insured to complete a business income report/worksheet showing the actual financial data for the previous twelve months, and estimated financial data for the next twelve months. An agreed value is determined from the financial data submitted. If a loss occurs, the insured's policy limit must be equal to the agreed value amount, if loses are to be paid in full. When this option is in force, the coinsurance clause does not apply.
Equipment Floater Coverages
The primary function of the ACORD Equipment Floater Application #146 is to collect underwriting and rating information for the Contractors Equipment Form. However, the application may be used for any other Inland Marine coverage that will fit into its structure. Since there areseveral Inland Marine Coverage Forms that fit into the structure of this application this document will briefly explain the many kinds of inland marine policies that cover many kinds of loss exposures. Inland marine policies are divided into two categories; filed and non-filed. Filed policies are characterized by a large number of potential insureds and reasonably similar loss exposures. The rates and forms of filed policies must be filed with the state insurance department. Non-filed policies are characterized by a relatively small number of potential insureds, and diverse loss exposures or both. The rates and forms for Non-filed policies are not filed with the state.
Non-Filed Forms
Contractors Equipment Floater
The property covered on the contractors equipment floater might range from simple hand tools to very large cranes. Virtually any type of mobile equipment or tool can be insured. The equipment covered can be used in a wide variety of operations such as, home improvements to strip mining. It might be used to build roads, buildings, pipelines, or many other types of structures. The coverage provided is for direct physical loss to the equipment. Rental reimbursement coverage can be added by endorsement to cover the cost of renting substitute equipment if covered property is out of service by a covered cause of loss.
Builders Risk / Installation
The inland marine builders risk portion of the policy form covers structures being built, temporary structures at the building site, and building materials that have not yet become part of the building. The building materials are covered while on the insured location, in transit, or in storage at another location. Business income coverage can also be provided on the policy. The installation portion of the policy usually insures a contractor's interest in building supplies or in fixtures that the contractor has been hired to install.
Electronic Data Processing Equipment Form
The inland marine electronic data processing policy is used to insure damage to data processing hardware, software, and media. The policy also covers the extra expense to continue data processing operations following a covered loss that resulted in damage to the system.
Bailee Policy
Bailee policies are written to insure dry cleaners, repair shops, public warehouses, and several other types of businesses with large amounts of the customers' goods in the insured's possession. There are two major types of bailee policies. The Bailee Liability Policy covers damage to customer's goods only if the insured is legally liable for the damage. The Bailee’s Customers Policy covers damage to customers' goods without regard to the bailee's liability.
Filed Policy Forms
Sign Coverage Form
The sign coverage form is used to insure neon fluorescent, automatic or mechanical electric signs, and lamps. All covered signs must be written on a schedule with a limit of insurance shown for each item on the schedule.
Equipment Dealers Coverage Form
The primary purpose of the equipment dealers coverage form is to insure the stock in trade of dealers in agriculture and construction equipment. Coverage is provided for customers equipment in the care, custody, or control of the named insured. The coverage can be written on a reporting basis or non reporting basis.
Commercial Articles Coverage Form
The commercial articles coverage form is used to cover photographic equipment and musical instruments used on a commercial basis. Coverage is provided for photographers, motion picture producers, professional musicians, and others. The form is not intended to provide coverage for dealers of these types of property. Coverage can be written on a schedule or blanket basis.
Mail Coverage Form
The mail coverage form is written for banks, trust companies, insurance companies, investment brokers and similar firms that frequently ship securities by mail. The mail coverage form purpose is to cover securities and other negotiable instruments while in transit by first class mail, certified mail, express mail, or registered mail.
Jewelers Block Coverage Form
This form was designed to meet the needs of retail jewelers. The form provides coverage for damage to the jeweler's stock of jewelry, precious and semi precious stones, watches, precious metals and similar merchandise. Similar property of others in the insured’s care, custody, or control is also covered.
