Commercial Property Policy -
Who is Covered
Reporting Forms - Risks whose property at risk fluctuates during the
policy year may find it burdensome to make increases and decreases in
coverage to avoid being penalized by the Coinsurance clause in the
event of under-insurance without being over-insured when the property
values are low.
For the larger insured, the carriers offer reporting form policies under
which the insured reports values at risk at stated periods during the
policy term. The final earned premium is computed on the basis of the
actual values reported. If the insured sets the provisional amount of
insurance high enough to cover the peak seasons, he will be secure
against under-insurance with its attendant coinsurance penalties as well
as waste of premium for over-insurance.
Policies may be written under one of 5 reporting options:
Full Value Reporting - The form imposes a strict duty of compliance withthe reporting clause in the policy, within 30 days after the reporting
period stated in the policy (note that 60 days are allowed for the first
month only, after an insured has converted to the reporting form for the
first time). The company's liability under the policy is limited to that
proportion of any loss which the last reported value bears to the actual
cash value of the property on the date of the report.
Provisions Modifying Actual Cash Value - Actual cash value means the
cost to replace property with other of like kind and quality. Several types
of property enumerated in the policy are treated differently:
Valuable Papers and Records - The policy will pay for the cost of blank
materials, including blank electronic media and the cost of labor to
transcribe the records when there are duplicates.
NOTE: The research expense cost, when duplicates do not exist, is
covered up to $2,500, if the policy contains a coinsurance clause of 80%
or higher. (See Research Expense Extension clause discussed here.)
Building - If the amount of insurance satisfies the coinsurance
requirement, then losses of $2,500 or less will be settled on the full
replacement value (without deduction for depreciation) or the cost to
repair. This provision does not apply to awnings or floor coverings;
appliances for ventilating, refrigerating, cooking, dishwashing or
laundering; or outdoor furniture or equipment.
Tenant's Improvements and Betterments - A tenant who leases premises
will often make additions, improvements, or changes in the property
which will make the premises better suited to his or her purposes. Most
leases provide that the improvements and betterments will become the
property of the landlord as soon as they are installed. The tenant retains
the right to enjoy the improvements only until the expiration of the lease.
In most states, where a lease is silent on this point, the same result
would be achieved by operation of law. The policy provides that
recovery for loss or damage to such property will be available in one of
three ways, discussed below:
1. If repair or replacement of the damaged or destroyed improvements
and betterments is made by the insured promptly, the insured will be
entitled to the actual cash value of the improvements and betterments.
2. If such repair or replacement is not made promptly, the company is
liable for the proportion of the original cost of the damaged improvements
and betterments which the unexpired term of the lease at the time of the
loss bears to the period from the date such improvements were made to
the expiration date of the lease, or the expiration of any renewal period
which the lease may contain.
3. If repairs or replacements are made without expense to the insured,
the company has no liability to the insured.
Who is Covered
Reporting Forms - Risks whose property at risk fluctuates during the
policy year may find it burdensome to make increases and decreases in
coverage to avoid being penalized by the Coinsurance clause in the
event of under-insurance without being over-insured when the property
values are low.
For the larger insured, the carriers offer reporting form policies under
which the insured reports values at risk at stated periods during the
policy term. The final earned premium is computed on the basis of the
actual values reported. If the insured sets the provisional amount of
insurance high enough to cover the peak seasons, he will be secure
against under-insurance with its attendant coinsurance penalties as well
as waste of premium for over-insurance.
Policies may be written under one of 5 reporting options:
 | daily values reported monthly; | |
| weekly values reported monthly; | |
| monthly values reported quarterly; | |
| monthly values reported annually; and | |
| monthly values reported monthly. |
Full Value Reporting - The form imposes a strict duty of compliance with
period stated in the policy (note that 60 days are allowed for the first
month only, after an insured has converted to the reporting form for the
first time). The company's liability under the policy is limited to that
proportion of any loss which the last reported value bears to the actual
cash value of the property on the date of the report.
Provisions Modifying Actual Cash Value - Actual cash value means the
cost to replace property with other of like kind and quality. Several types
of property enumerated in the policy are treated differently:
| Stock - Stock which has been sold but not delivered to the | |
| purchaser will be valued at its selling price, less discounts allowed the purchaser and expenses which the insured would otherwise have had. |
| Glass - Glass will be valued at its replacement cost, including the | |
| cost of safety glazing material, if required by law. |
Valuable Papers and Records - The policy will pay for the cost of blank
materials, including blank electronic media and the cost of labor to
transcribe the records when there are duplicates.
NOTE: The research expense cost, when duplicates do not exist, is
covered up to $2,500, if the policy contains a coinsurance clause of 80%
or higher. (See Research Expense Extension clause discussed here.)
Building - If the amount of insurance satisfies the coinsurance
requirement, then losses of $2,500 or less will be settled on the full
replacement value (without deduction for depreciation) or the cost to
repair. This provision does not apply to awnings or floor coverings;
appliances for ventilating, refrigerating, cooking, dishwashing or
laundering; or outdoor furniture or equipment.
Tenant's Improvements and Betterments - A tenant who leases premises
will often make additions, improvements, or changes in the property
which will make the premises better suited to his or her purposes. Most
leases provide that the improvements and betterments will become the
property of the landlord as soon as they are installed. The tenant retains
the right to enjoy the improvements only until the expiration of the lease.
In most states, where a lease is silent on this point, the same result
would be achieved by operation of law. The policy provides that
recovery for loss or damage to such property will be available in one of
three ways, discussed below:
1. If repair or replacement of the damaged or destroyed improvements
and betterments is made by the insured promptly, the insured will be
entitled to the actual cash value of the improvements and betterments.
2. If such repair or replacement is not made promptly, the company is
liable for the proportion of the original cost of the damaged improvements
and betterments which the unexpired term of the lease at the time of the
loss bears to the period from the date such improvements were made to
the expiration date of the lease, or the expiration of any renewal period
which the lease may contain.
3. If repairs or replacements are made without expense to the insured,
the company has no liability to the insured.
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MY Insurance Agency
The materials on this page is meant to be
informative in nature. Due to the ever
changing and varying state laws, and the fact
some insurers offer coverage in slightly
different forms from the Insurance Services
Office (ISO) standard forms, we cannot
guarantee the accuracy of the materials on
this page.
informative in nature. Due to the ever
changing and varying state laws, and the fact
some insurers offer coverage in slightly
different forms from the Insurance Services
Office (ISO) standard forms, we cannot
guarantee the accuracy of the materials on
this page.
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