Property

There are four types of parties that may have an insurable interest in commercial property:

Owner - This party may lose their investment for the property and any income it may generate. Mortgagee or Lien Holder - This party may still be collecting loan payments from the owner for the property. Lessees or Tenants - This party may have the right to occupy the property for a set length of time. Signers of Contractual Agreements - This party may have a contractual arrangement with the user (often the lessee) of the property.

Coinsurance Provision - Penalty

(Coverage Limit / Coverage Limit Required) X Loss = Loss Amount Paid

The most common coinsurance percentages,

80% of the property's total replacement cost 90% of the property's total replacement cost (5% premium credit) 100% of the property's total replacement cost (10% premium credit)

Building

A commercial property policy provides coverage for building property. Even though it is referred to as "building" property, a variety of property is included in this coverage.

Business Personal Property

A commercial property policy provides coverage for the insured's personal property. -Furniture and Fixtures -Machinery -office Equipment and Supplies -Insureds interest as a tenant in improvements and betterments -Leased property the insured has a contractual responsibility -Labor, materials, or services the insured provides

There are two primary valuation methods in commercial property:

Actual Cash Value (ACV) - the cost to replace the property minus depreciation bullet Replacement Cost - the cost to replace the property with like kind and quality without taking depreciation into account

These coverage forms have three primary types of coverage:

Building Business Personal Property (BPP) Business Income

There are three main replacement costs that need to be calculated:

Building Replacement Cost Business Personal Property Replacement Cost Business Income

Building Property

Buildings - any six-sided structure Structures - anything other than a building Fixtures - any man-made objects attached to land in some manner (not including buildings or structures) Permanently Installed Machinery and Equipment Improvements and Betterments - any permanent alterations or repairs to buildings or structures including the addition, alteration, or repair of fixtures or permanently installed machinery or equipment

Insurance carriers review a set of risks known as ________ to determine whether or not they will write an insurance policy for an insured.

COPE

There are three steps an insured and the CSR must take when setting the coverage limits for a commercial property policy,

Calculate Property Values Choose a Coinsurance Provision Percentage Write the Coverage Limits

COPE stands for:

Construction - the location, materials and age of the building Occupancy - who is in the building and how it is used Protection - the features reducing the risk to the property Exposure - the uncontrollable hazards surrounding the property

It is important for CSRs to help the insured understand these two areas of concern:

Covered Causes of Loss Coinsurance Provision - Penalty

Business Personal Property Additional Coverages

Debris Removal Preservation of Property Fire Department Service Charge Pollutant Clean Up and Removal Increased Cost of Construction Electronic Data (up to $2,500)

The coverage applies to three different extra expenses incurred:

Extra expenses to avoid the suspension of operations Extra expenses to minimize the suspension of operations Extra expenses to repair or replace property to reduce the business income loss

Each line of insurance has unique details that must be understood as a customer service representative (CSR).

For commercial property, the producer or CSR must be able to understand the parties who may have an insurable interest with the property.

Calculate Property Values

In commercial property, insurance carriers need to know the value of the property that will be covered by the policy.

Building and Business Personal Property Coverage Extensions

Newly Acquired or Constructed Property Personal Effects and Property of Others Valuable Papers and Records (other than Electronic Data) Property Off-Premises Outdoor Property Non-owned Detached Trailers

The CSR Support Cycle involves eight major steps:

Obtain Required Submission Information Complete ACORD Forms Send the Submission Receive and Review Quotes Create and Present the Proposal Bind Coverage with the Insurance Company Check the Policy Support the Insured

Rental Value

Rental value coverage also applies when there is a suspension of operations to restore or replace lost or damaged building property. If the property is rented out to others, the insurance carrier will pay the insured for the loss of rental income incurred during the restoration or replacement period.

Two primary methods are used for writing commercial property coverage limits:

Schedule Coverage Blanket Coverage

Most often, sending a few emails to the insured is enough to collect the following information:

Schedule of Locations Building Replacement Cost Amount Business Personal Property Replacement Cost Amount Business Income Amount

Business Income This limit is more difficult to calculate as an insured has to make two different predictions:

The amount of income they are expected to generate over the policy period. The amount of time they will need to repair or replace property after a covered cause of loss.

Business Income

The coverage applies to two different types of business income: Net income that would have been earned Continuing operating expenses (such as payroll)

Schedule Coverage

This method involves writing coverage limits that are scheduled (specific) to each type of property coverage. At the time of a loss, this method makes the limit for building coverage separate from the limit for business personal property coverage, as well as, separate from the limit for business income coverage.

Blanket Coverage

This method involves writing coverage limits that blanket (applies to) different types of property coverage. The limits can be written in such a way that they apply to: More than one type of property coverage at the same location The same type of property coverage at multiple locations All types of property coverages at multiple locations

Insurable Interest

Those parties that have financial stake or equity in a property

Standard Coverage Forms

Used to determine what types of property qualify for coverage.