Commercial Property Coverage Forms & Endorsements
This domain tests how ISO commercial property forms insure property values, not just perils. You must know what CP 00 10 Building and Personal Property covers, how limits and coinsurance interact, which extensions apply automatically, and where endorsements change the base form.
Covered property and limits
- Building: completed additions, fixtures, permanently installed machinery, outdoor fixtures, and personal property used to service the building.
- Business personal property: furniture, fixtures, stock, machinery, and tenant’s improvements and betterments if not covered under the building.
- Personal property of others: property in your care, custody, or control, usually subject to a stated limit. Each item has a limit. Blanket limits apply across multiple buildings or items, but blanket coinsurance uses total values.
Coinsurance and valuation
Most CP 00 10 losses are valued at actual cash value unless replacement cost is selected. Coinsurance requires a limit of at least a percentage-often 80%, 90%, or 100%-of replacement cost at time of loss. The formula is: (limit ÷ required amount) × loss, then subtract the deductible. An Agreed Value endorsement removes the coinsurance penalty when the limit equals the agreed value.
Extensions that appear on exams
- Newly acquired or constructed property: a sublimit, commonly $250,000 for buildings and $100,000 for business personal property, for a limited period.
- Valuable papers and records, personal effects, outdoor signs, and electronic data: commonly $2,500 each.
- Pollutant cleanup and removal: commonly $10,000 per occurrence.
- Debris removal: additional coverage commonly 25% of the sum of the deductible plus the direct damage payment.
- Preservation of property: 30 days after a loss to protect covered property from further damage.
Worked example
An 80% coinsurance clause applies. Replacement value is $1,000,000; the limit is $700,000; the loss is $200,000; the deductible is $5,000. Required insurance is 80% × $1,000,000 = $800,000. The ratio is $700,000 ÷ $800,000 = 0.875. Covered loss is 0.875 × $200,000 = $175,000. After the $5,000 deductible, the payment is $170,000.
Traps that cost marks
Do not apply coinsurance to the limit instead of the loss. Do not forget the deductible. Newly acquired property does not carry the full policy limit. Personal property of others is not the same as the insured’s business personal property. Agreed Value is not the same as replacement cost valuation.