Most building and business 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 insurance carried is less than the
amount required, a penalty could be placed on the insured.
Replacement Cost
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 or the cost to replace with other
property of comparable material and quality. Actual cash value is replacement
cost, minus the accumulated depreciation for age and condition.
Cause 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. The special form
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.
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.
Collision
This coverage provides protection against loss or
damage to a covered auto or a non-owned auto resulting from the
impact with another vehicle or object.
Comprehensive
Comprehensive coverage provides protection
against loss or damage to a covered auto resulting from loss other
than a collision or upset. This coverage also provides for
supplemental payments for transportation expenses in the event of
total theft of a covered auto or a non-owned auto. Coverage begins
forty-eight hours after the theft.
Medical Payments
The insuring agreement states that the insurer
will pay all reasonable and necessary medical and funeral expenses,
up to the stated limits, Incurred by an insured because of bodily
injury caused by an accident. The insured is the named insured, the
insured's employees and guests, and any other person occupying a
covered auto.
Underinsured
This coverage is added to supplement the
Uninsured Motorist Coverage. The coverage applies only when the
other driver has liability limits at the time of an accident, but
the liability limits carried may be insufficient to pay for damages
for which the driver is responsible. This is when the insured's
Underinsured Motorists Coverage would apply and payment for the
difference could be made.
Uninsured
This insuring agreement pays for bodily injury to
an insured who is injured by an uninsured motorist, a hit-and-run
driver, or a driver whose insurer becomes insolvent. These benefits
are paid under the named insured's policy.
PIP
Personal Injury Protection (PIP) is an
endorsement that adds No-Fault benefits. No•Fault means that in the
event of an automobile accident, each party collects from his or her
own insurer regardless of fault. The PIP endorsement is only
available in certain states with No-Fault Laws. The endorsement
applies only to bodily injury and not to property damage (the state
of Michigan is the exception to property damage). No-Fault Laws vary
widely from state to state.
SIR
The self-insured retention is the amount of the
loss an insured must pay before the umbrella policy would be
required to respond. The self insured retention would only apply
when a loss is excluded from coverage under the primary policy, but
not excluded under the umbrella policy.
