Commercial Property and Package Coverage
Commercial property mechanics
The building and personal property coverage form insures buildings, business personal property, and personal property of others. Causes of loss forms parallel personal lines: basic, broad, and special (open peril). Coinsurance is common at 80% or 90% of value, and the same underinsurance formula applies. Blanket limits, agreed value, margin clauses, and reporting forms modify the coinsurance exposure. Valuation may be ACV, replacement cost, or functional replacement cost.
Time-element coverages
Business income pays lost net income plus continuing normal operating expenses during the period of restoration, which begins at the time of loss, not after the deductible or waiting period. A 72-hour waiting period is typical. Extra expense pays costs to continue operations and has its own limit; it is not capped by the business income limit and can apply even with no income loss. Civil authority coverage responds when access is prohibited by order of a civil authority because of covered damage nearby, usually with a short waiting period and limited days.
Packages
The businessowners policy (BOP) bundles property and liability for eligible small and medium businesses, with limited eligibility by size and occupancy. Larger or ineligible risks use commercial package policies with separate coverage parts.
Traps
- Treating extra expense as subject to the business income limit.
- Confusing period of restoration with period of indemnity.
- Forgetting ordinance or law, spoilage, and equipment breakdown are separate coverages.
Rule of thumb: business income replaces lost profit; extra expense buys a way to keep operating.