Commercial Property insurance covers the risk of property loss in a variety of commercial situations, including commercial buildings, equipment, furniture, fixtures, inventories, business records, supplies and other physical items.

Property insurance may cover two types of property losses:

• Direct losses may be covered when property is lost, stolen, damaged or destroyed.
• Indirect or consequential losses related to direct losses may also be covered.

Common Policy Terms

Replacement Cost and Actual Cash Value – Property can be valued in several different ways. Insurance companies commonly use one of these two methods of determining property values, and consequently how the losses will be paid. Insurers consider Replacement Cost of a property item to be the cost to replace it with new property of like kind and quality. Actual Cash Value is the Replacement Cost, minus the accumulated depreciation for age and condition.

Coinsurance – Most building and personal property policies 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 the insurance carried is less than the amount required, a penalty could be placed on the insured.

Inflation Guard – Even when a building is insured to the appropriate value at the beginning of the policy term, it is often not accurate at the end of the policy term, due to inflation. With the Inflation Guard coverage, the policy limit will increase gradually during the policy term so that the total amount is increased to the desired percentage increase at the end of the policy term.

Business Income – This coverage is designed to replace the operating income of a business during the period when damage to the building or contents prevents this from being earned. 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. The loss must have occurred from a loss that occurred to the property, and which is covered by the policy.

Extra Expenses – These are any expenses over and above those that would have been incurred during the normal operation of the business. Some of the covered expenses are expenses incurred to avoid or minimize the suspension of operations, expense to repair or replace property, and expenses paid for overtime work to speed up the restoration of the business.

Civil Authority – This coverage applies 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, as long as the cause of loss to the adjacent property was caused by a loss covered on the insured’s property policy.