Finance 431: Property-Liability Insurance Lecture 10: Commercial Property Insurance.
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Transcript of Finance 431: Property-Liability Insurance Lecture 10: Commercial Property Insurance.
Finance 431:Property-Liability Insurance
Lecture 10:Commercial Property Insurance
Commercial Property Insurance
Chapter 10
Business Property Insurance
Appendix C
Building and Personal Property Coverage Form
Property Risk Management
Property loss - any loss that a person or organization sustains as a result of the damaging, destruction, taking or loss of use of property in which that person or organization has a financial interest
Risk Management Process1 - Identify and analyze loss exposures2 - Examine the feasibility of alternative risk management techniques3 - Select the best risk management technique4 - Implement the technique5 - Monitor the program
Identify and Analyze Loss Exposures
Property Loss Exposures1 - The item exposed to loss
2 - The cause of loss
3 - The effects of a loss
The Item Exposed to Loss• Real property
– Permanent structures• Buildings• Built-in appliances• Fences
• Personal property– Physical property that is mobile
• Vehicles• Furniture• Inventory
• Valuable information
What type of loss exposure is an office building?
A) Real property
B) Personal property
C) Valuable information
D) None of the above
What type of loss exposure is a company’s computer?
A) Real property
B) Personal property
C) Valuable information
D) None of the above
What type of loss exposure is a light pole in the back yard of a business?
A) Real property
B) Personal property
C) Valuable information
D) None of the above
What type of loss exposure is a customer database stored on the company’s computer?
A) Real property
B) Personal property
C) Valuable information
D) None of the above
Cause of Loss
Anything that could cause a loss to propertyExamples:
FireTheftLightningEarthquakeInsect damageMold
Which of the following would not be considered a cause of loss for property?
A) Animals
B) Burglary
C) Civil commotion
D) Drought
E) None of the above
Which of the following would not be considered a cause of loss for property?
A) Falling objects
B) Hurricane
C) Liability
D) Power outage
E) None of the above
The Effects of Loss• Reduction in value
– Property is worth less than before loss• Cost to repair or replace• Loss of revenue
– Income loss due to loss to property• Extra expense
– Additional expenses incurred to continue operations• Newspaper publishing• Banking services
Direct and Indirect Losses
• Direct loss – Values physically destroyed or damaged
• Indirect (or consequential) loss– Losses caused by inability to use property
Loss of rent for an apartment owner after a fire is which type of loss?
A) Direct loss
B) Indirect loss
C) Cost to repair
D) Extra expense
E) None of the above
Overview of Commercial Property Insurance
Insurance Advisory Organizations
Insurance Services Office (ISO)
American Association of Insurance Services (AAIS)
Develop and file with state insurance departments:
Policy forms
Manual rules
Loss costs
ISO Commercial Lines Program (1986)
“Commercial property”
Building and contents (on or within 100’ of insured location)
Boiler and machinery
Commercial crime
Employee dishonesty, forgery, theft, burglary, robbery, extortion
Commercial inland marine
Elements of transportation or communication
Property in transit, mobile equipment, property being installed by a contractor, bridges, radio towers
Farm
Commercial auto and liability
Building and Personal Property Coverage Covered Property
Building - Table 10-1Building or structure described in the declarations including• Completed additions• Permanently installed fixtures, machinery and equipment• Outdoor fixtures• Personal property used to maintain or service the building,
structure or premises• Additions under construction, alterations, and repairs to the
building or structure; and related materials, equipments, supplies, and temporary structures on or within 100 feet of described premises
Which of the following would not be considered part of the building under the BPP definition?
A) WindowsB) Permanently installed countersC) Snowblower used to clear
sidewalk in front of businessD) Lumber stored on the premises
being used for an additionE) All of the above are included
Building and Personal Property Coverage Covered Property – (2)
Your Business Personal Property – Table 10-2Property owned by the insured
Furniture and fixturesMachinery and equipment“Stock”All other personal property owned by you and used in your business
Property owned by othersLabor, materials or services furnished on property of othersImprovements and bettermentsLeased personal property
Personal property of others$2500 for property in the care, custody or control of insured
Which of the following would not be considered business personal property for a bookstore under the BPP definition?
A) BooksB) Cash registerC) Storeowner’s cell phone used for
business purposesD) Chairs placed around bookstore for
customers to useE) All of the above are included
Property Not Covered under BPPTable 10-3Buildings and other real property
Land Roadways
Water Retaining walls
Bridges Piers
Plants and outdoor propertyGrowing crops and lawns
Outdoor crops
Outdoor trees, shrubs and plants
Outdoor fences
Outdoor signs, unless attached to buildings
Property Not Covered - continuedOther personal property
DeedsEvidence of debtMoneyCurrencyAccounts BillsSecurities and notesAlso, food stamps
Vehicles, Watercraft, AircraftAnimalsValuable papers and recordsProperty otherwise covered (BPP is excess)Contraband
Building and Personal Property Coverage
Covered locations
Described locations and off premises
Additional coverages – Table 10-4
Debris removal
Pollutant cleanup and removal
Preservation of property
Fire department service charge
Building and Personal Property Coverage
Coverage Extensions – Table 10-4These extensions are not automatic. They mustbe added when the policy is purchased.
Newly acquired or constructed propertyPersonal effects and property of othersValuable papers and recordsProperty off premisesOutdoor property
Covered only for fire, lightning,explosion, riot or civil commotion or aircraft
Covered Causes of Loss
Evolution
Fire
Fire and lightning (Standard Fire Policy)
Extended coverage (EC)
Vandalism and malicious mischief (VMM)
Extended Coverage(W.C.SHAVER)
Wind
Civil commotion
Smoke
Hail
Aircraft
Vehicles
Explosion
Riot
BPP Cause of Loss OptionsBasic Form – Table 10-5
Fire, lightning and extended coveragesSprinkler leakageSinkhole collapseVolcanic action
Broad Form – Table 10-5Basic form perils plusWeight of snow, ice or sleetWater damageFalling objectsBreakage of glass
Special Form – All RiskIncludes limited coverage for theft