Property and Casualty Insurance Basics
Policy anatomy
A property or casualty policy has declarations, an insuring agreement, conditions, exclusions, definitions, and endorsements. Declarations identify the insured, locations, limits, deductible, and policy period. The insuring agreement states the promise; exclusions narrow it; conditions set duties such as prompt notice, proof of loss, and cooperation. Endorsements amend the form and control over conflicting printed language.
Limits may be per occurrence, per person, aggregate, scheduled, or blanket. A deductible is the insured's retained loss. Commercial property usually applies a coinsurance clause: the insured must carry a stated percentage of value, often 80%. If it carries less, recovery is reduced by the ratio of carried insurance to required insurance. Occurrence policies respond to injury or damage during the policy period; claims-made policies respond when the claim is made, subject to retroactive dates.
Worked example
A building has a $1,000,000 replacement value, an 80% coinsurance requirement, and $400,000 of insurance. Required insurance is $800,000. A $200,000 covered loss produces a coinsurance factor of 400,000 / 800,000 = 0.50, so the loss payment is $100,000 before the deductible. If the deductible is $5,000, the payment is $95,000.
Traps
Apply the coinsurance penalty before the deductible in the standard property form. Do not confuse a per-occurrence limit with an aggregate. A certificate of insurance is evidence of coverage, not the policy itself. Endorsements can delete exclusions, so read the full policy, not only the base form.