How to read a commercial property insurance policy

Reading a commercial property insurance policy can be a daunting task, as it is a legal document that contains complex terms and conditions. However, here are some steps that can help you understand your policy:

• Read the declarations page: This is the first page of the policy that provides basic information about the policyholder, the property being insured, the coverage limits, and the premiums.
• Read the insuring agreement: This section explains what the policy covers and what it doesn’t cover. It outlines the specific risks and perils that are covered under the policy and the exclusions that apply.
• Review the definitions section: The policy may use technical terms and jargon that you may not be familiar with. The definitions section explains what these terms mean and provides clarity on how they apply to the policy.
• Understand the exclusions: Exclusions are provisions that remove certain risks from coverage. It is important to understand what is excluded from the policy to avoid surprises later on.
• Review the conditions section: This section outlines the obligations and responsibilities of both the policyholder and the insurance company. It also explains the procedures for filing a claim and the requirements for maintaining coverage.
• Consider additional coverage: Depending on your business and property, you may need additional coverage beyond the basic policy. Consider adding endorsements or riders to your policy to ensure you have adequate coverage.
• Consult with an insurance professional: If you have questions about your policy, it is always a good idea to consult with an insurance professional such as Eugene C Yates Insurance Agency who can provide guidance and advice.

Read the declarations page

The declarations page of a commercial property insurance policy is a summary of the key information about the policy, including the policyholder, the property being insured, the coverage limits, and the premiums. Here’s what you can expect to find on a typical declarations page:

• Policy Information: This includes the policy number, the policy period, and the name of the insurance company providing the coverage.
• Insured Information: This section will list the name and address of the policyholder, as well as any additional insured parties. It may also include contact information and other identifying details.
• Property Information: This section will describe the property being insured, including the address, the type of building, and the property usage (e.g., office building, warehouse, retail store).
• Coverage Limits: This section will list the specific coverage limits for each type of coverage provided by the policy, such as property damage, liability, and business interruption.
• Deductibles: This section will list the deductibles that apply to each type of coverage provided by the policy. The deductible is the amount that the policyholder must pay out of pocket before the insurance company will begin to cover losses.
• Premiums: This section will list the total premium for the policy, as well as the breakdown of the premiums for each type of coverage provided by the policy.

It is important to review the declarations page carefully to ensure that the coverage and limits listed meet your needs and expectations. If you have any questions or concerns, you should contact your insurance agent or the insurance company directly for clarification.

Read the insuring agreement

The insuring agreement is a section of a commercial property insurance policy that outlines the specific risks and perils that are covered under the policy, as well as the conditions under which the insurance company will pay for losses. Here are the key elements you can expect to find in an insuring agreement:

• Covered Perils: This section will list the specific risks and perils that are covered by the policy, such as fire, theft, vandalism, and water damage. It may also include additional perils that are specific to your policy.
• Covered Property: This section will describe the property that is covered by the policy, including the buildings, structures, equipment, and inventory.
• Payment of Losses: This section will explain how the insurance company will pay for losses that are covered by the policy. It will typically state that the insurance company will pay the actual cash value or replacement cost of the damaged property, subject to any deductibles.
• Limits of Liability: This section will specify the maximum amount that the insurance company will pay for each type of loss or claim under the policy. It is important to review these limits to ensure that they are adequate to cover your potential losses.
• Exclusions: This section will list the perils and risks that are specifically excluded from coverage under the policy. Exclusions may include losses due to war, government action, and certain types of natural disasters, among others.
• Conditions: This section will outline the obligations and responsibilities of both the policyholder and the insurance company. It may include requirements for maintaining the property, reporting losses, and cooperating with the insurance company during the claims process.

It is important to review the insuring agreement carefully to ensure that you understand what is covered and what is excluded under the policy. If you have any questions or concerns, you should contact your insurance agent or the insurance company directly for clarification.

Review the definitions section

The definitions section of a commercial property insurance policy is where you can find the meanings of important terms and jargon used throughout the policy. Here are some key terms you may find defined in this section:

• Actual Cash Value (ACV): The fair market value of the property at the time of the loss, taking into account its age, condition, and other factors.
• Replacement Cost: The cost to replace damaged property with new property of similar kind and quality, without deducting for depreciation.
• Deductible: The amount of the loss that the policyholder must pay out of pocket before the insurance company will begin to cover the remaining costs.
• Named Peril: A specific risk or peril that is explicitly listed in the policy as being covered.
• Open Peril: A coverage type that covers all risks except those specifically excluded in the policy.
• Exclusions: Specific risks or perils that are not covered by the policy.
• Endorsement: An amendment to the policy that modifies or adds coverage beyond what is provided in the original policy.
• Additional Insured: A person or entity that is added to the policy as an insured party, in addition to the primary policyholder.
• Business Interruption: Coverage that provides financial protection for loss of income or profits that may result from a covered loss or interruption of business operations.
• Civil Authority Coverage: Coverage that provides protection for loss of income or profits that may result from government-mandated closures or other actions that prevent access to the insured property.

It is important to carefully review the definitions section to ensure that you understand the terms and jargon used throughout the policy. This can help you better understand your coverage and ensure that you are adequately protected in the event of a loss.

Understand the exclusions

Exclusions are specific risks or perils that are not covered by a commercial property insurance policy. It is important to carefully review the exclusions section of your policy to understand what is not covered by your policy. Here are some common exclusions that you may find in a commercial property insurance policy:

• Earthquake or Flood Damage: Most standard commercial property insurance policies do not cover damage caused by earthquakes or floods. Separate coverage may need to be purchased for these perils.
• War or Terrorism: Damage caused by war, terrorism, or civil unrest is typically excluded from coverage under a commercial property insurance policy.
• Government Action: Losses caused by government action, such as confiscation or destruction of property, may not be covered.
• Wear and Tear: Damage caused by normal wear and tear, aging, and deterioration is generally not covered under a commercial property insurance policy.
• Intentional Acts: Losses caused by intentional or criminal acts, such as arson or vandalism, are typically excluded from coverage.
• Nuclear Hazard: Damage caused by nuclear hazard or radiation is usually excluded from coverage under a commercial property insurance policy.
• Employee Dishonesty: Losses caused by dishonest acts of employees, such as theft or embezzlement, may not be covered under a standard policy.

It is important to understand the exclusions in your policy to ensure that you have appropriate coverage for your business. If you have concerns about specific exclusions, you should discuss them with your insurance agent or the insurance company directly to determine if additional coverage is available.

Review the conditions section

The conditions section of a commercial property insurance policy outlines the obligations and responsibilities of both the policyholder and the insurance company. Here are some key elements that you may find in this section:

• Notice of Loss: This section will explain the policyholder’s obligation to report any losses or damages to the insurance company in a timely manner. It may specify a deadline for reporting losses, and may outline the information that the policyholder must provide to the insurance company.
• Cooperation Clause: The policyholder is required to cooperate with the insurance company during the claims process. This may include allowing the insurance company to inspect the damaged property, providing documentation and evidence of the loss, and assisting the insurance company in the investigation of the claim.
• Salvage: The insurance company may have the right to take possession of damaged property in order to reduce its losses. This section will outline the policyholder’s responsibilities with respect to damaged property.
• Appraisal: If there is a dispute over the amount of a loss, this section may outline the process for resolving the dispute through an appraisal.
• Subrogation: This section outlines the insurance company’s right to seek reimbursement from a third party who may have caused or contributed to the loss.
• Policy Changes: This section will explain the policyholder’s right to make changes to the policy, as well as the process for making those changes.
• Cancellation and Non-Renewal: This section will outline the circumstances under which the insurance company may cancel or choose not to renew the policy.

It is important to review the conditions section of your policy carefully to understand your obligations and responsibilities in the event of a loss. If you have any questions or concerns, you should discuss them with your insurance agent or the insurance company directly.

Consider additional coverage

When reviewing a commercial property insurance policy, it is important to consider if additional coverage may be necessary to adequately protect your business. Here are some types of additional coverage that may be worth considering:

• Flood Insurance: If your business is located in an area that is at risk of flooding, you may want to consider purchasing flood insurance. Standard commercial property insurance policies typically do not cover flood damage.
• Earthquake Insurance: If your business is located in an area that is at risk of earthquakes, you may want to consider purchasing earthquake insurance. Standard commercial property insurance policies typically do not cover earthquake damage.
• Business Interruption Insurance: If your business relies heavily on a physical location to operate, business interruption insurance may be worth considering. This coverage can help protect against loss of income or profits in the event that your business operations are interrupted due to a covered loss.
• Equipment Breakdown Insurance: If your business relies heavily on equipment to operate, equipment breakdown insurance may be worth considering. This coverage can help protect against the cost of repairs or replacement of equipment that breaks down due to mechanical or electrical failure.
• Cyber Liability Insurance: If your business stores sensitive customer or employee data, cyber liability insurance may be worth considering. This coverage can help protect against the costs associated with data breaches and cyber attacks.
• Employment Practices Liability Insurance: If your business has employees, employment practices liability insurance may be worth considering. This coverage can help protect against claims of discrimination, harassment, or wrongful termination.
• Directors and Officers Liability Insurance: If your business has a board of directors or officers, directors and officers liability insurance may be worth considering. This coverage can help protect against claims of mismanagement or breach of fiduciary duty.

It is important to discuss your specific needs and risks with your insurance agent or the insurance company directly to determine if additional coverage may be necessary for your business.

Consult with an insurance professional such as Eugene C Yates Insurance Agency

Consulting with an insurance professional is an important step in understanding and selecting the right commercial property insurance policy for your business. An insurance professional can help you navigate the complex world of insurance and provide guidance on the coverage options that are available to you. Here are some reasons why you may want to consider consulting with an insurance professional:

• Expertise: Insurance professionals have extensive knowledge and experience in the insurance industry. They can help you understand the coverage options that are available to you, and can provide guidance on selecting the right policy for your business.
• Customization: An insurance professional can work with you to customize your policy to meet the unique needs and risks of your business. They can help you identify any gaps in coverage and recommend additional coverage options that may be necessary.
• Claims Assistance: In the event that you need to file a claim, an insurance professional can provide guidance and support throughout the claims process. They can help you understand your obligations and responsibilities, and can advocate on your behalf to ensure that your claim is handled fairly and efficiently.
• Risk Management: An insurance professional can help you identify and mitigate potential risks to your business. They can provide guidance on safety and loss prevention measures, and can recommend risk management strategies that can help protect your business.

When selecting an insurance professional, it is important to choose someone who is licensed and experienced in commercial property insurance. You should also choose someone who is responsive and communicative, and who can provide you with the support and guidance that you need throughout the life of your policy.