Commercial Property Insurance Terms
There are numerous important commercial property insurance terms, but this is an overview of a few key terms.
According to its glossary, the International Risk Management Institute (IRMI)’s defines a commercial property policy as “an insurance policy for businesses and other organizations that insures against damage to their buildings and contents due to a covered cause of loss, such as a fire. The policy may also cover loss of income or increase in expenses that results from the property damage.” 1
Related Matters: Real Canadian Business Claims
Business leaders use a commercial property insurance policy to safeguard their bricks and mortar location(s), inventory and/or equipment against potentially catastrophic damage that may result from events such as a fire, flood, earthquake, tornado or windstorm. These type of insurance policies may be written on a named perils or all risks basis.
3 Commercial Property Insurance Terms – What You Should Know
If you are looking to renew or purchase commercial property insurance, understanding common industry terminology is critical. Brokers, insurers, claims adjusters, underwriters and other professionals use very specific terms when describing industry products and services. When you are completing a commercial property insurance application or reviewing a policy, terms to keep in mind include:
- Named Perils Coverage. IRMI notes that this is “a property insurance term referring to policies that provide coverage only for loss caused by the perils specifically listed as covered. It contrasts with all risks coverage, which applies to loss from all causes not specifically listed as excluded.” 2
- Statement of Values. This is the total value of property exposures and is used by underwriters to calculate a policy premium. A statement of values should be completed by the business with the support and guidance of a broker and/or insurer and submitted. Connect with an ALIGNED Insurance Advocate today for a Statement Of Values (SOV) template.
- Business Interruption Worksheet. Also known as a business income worksheet, IRMI defines this as “a form used to estimate an organization’s annual business income for the upcoming 12-month period, for purposes of selecting a business income limit of insurance. The selected percentage, or multiple, of the organization’s estimated annual business income for the upcoming 12-month period should be based on how long it would take to replace all damaged property and resume operations in the event of a worst-case loss. For some organizations, this period could exceed 12 months.” 3
Why Are Commercial Property Insurance Terms Important?
There are many subtle and important differences between commercial property insurance policies. When completing a statement of values and business interruption worksheet as part of your commercial property insurance application, it’s important to understand what’s covered as well as what’s excluded.
Click to download an ALIGNED commercial property insurance application. To learn more about commercial property insurance options, talk to one of our local insurance brokers today.
Source: 1, 2, 3 IRMI
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