Commercial Property Insurance
Commercial Forms
The commercial property policy covers business real property, personal property, and business income. Key forms include the Building and Personal Property Coverage Form (BPP), the Causes of Loss forms (basic, broad, special), and the Business Income form. Candidates must understand coinsurance, agreed value, and the period of restoration.
Business Income and Extra Expense
Business income coverage replaces lost net income and continuing expenses during the period of restoration. Extra expense covers costs to resume operations quickly. The period of restoration begins at the time of loss and ends when the property should be repaired with reasonable speed.
Traps
Questions often confuse business income with extra expense or misapply the coinsurance formula. Another trap is treating the period of restoration as the actual repair time rather than the reasonable time to repair. Also watch for the special causes of loss form, which is open-peril.
Rule of Thumb
Coinsurance penalty = (limit carried / limit required) × loss, capped at the policy limit. Always compute the required limit first.
Worked Example
Required limit is $1,000,000; carried limit is $800,000; loss is $200,000. Recovery = (800,000 / 1,000,000) × 200,000 = $160,000, subject to the deductible.