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Homeowner Associations » Commercial Property

Commercial Property Definitions

Occurrence: An incident or event that triggers coverage of an insurance policy.

Peril: A cause for a potential loss (e.g. fire, lightning, wind, etc.)

Open Peril: also known as “All-Risk” or “Special Form”, this policy will cover all losses except those specifically excluded.
Replacement Cost: In the event of a loss, the policy will pay to replace property to cost, without a deduction for depreciation.

Actual Cash Value (ACV): this policy will pay to replace property to cost minus depreciation.

Fire-Resistive Construction: Classification of Construction in which materials used for walls, floors and roofs must be resistive to fire for at least two hours.

Modified Fire-Resistive Construction: Classification of Construction in which materials used for walls, floors and roofs must be resistive to fire for at least one hour.

Noncombustible Construction: Classification of Construction in which materials used for exterior walls, floors and roofs are noncombustible.

Joisted Masonry Construction: Classification of Construction in which floors and roofs are made of combustible materials (such as wood), but the exterior walls are made of noncombustible masonry.

Framed Construction: Classification of Construction in which walls, floors and roofs are made of wood or other combustible materials.

Building Ordinance: When replacing damaged property, this coverage provides against loss sustained as a result from the enforcement of an ordinance or law regulating construction, repair or demolition.

Business Personal Property: Furniture, fixtures, equipment and other personal property owned by the insured and used on premises or within 100 feet thereof.

Maintenance Fees: In the event of a covered loss, this will provide coverage for uncollectible monthly dues owed to the insured.

Deductible: the amount of damage that must occur, indemnified by the insured, until coverage will kick in.

Total Insurable Values (TIV):
The total limit of coverage provided for on the policy (replacement cost).

Additional Insured: A person or entity, other then the Named Insured, who may be protected by some of the terms of the policy. The additional insured may be a spouse, member of the family, unit owner, committee member, officer, or real estate manager.

Named Insured: The person or entity named who is protected by the policy.

All-Risk: See “Open Peril”.

Bare Walls: Term used to describe a property policy that insures up to the bare walls only of a unit and provides no coverage for the interiors or contents of a unit.

Binder: A form providing temporary proof of insurance pending the issuance of the actual policy. It must be in writing and is not a full contract of insurance.

Blanket Coverage: Property coverage can be Scheduled or Blanketed. If Blanketed, the buildings are insured with one single limit. This provides some margin of error if incorrect values were used on the application.

Scheduled Coverage:
Property coverage can be Scheduled or Blanketed. If Scheduled, each building is insured to a particular value and listed as such on the policy.

Cause of Loss:
formerly known as “peril”, this is a sudden and accidental event

Co-Insurance Agency, Inc.: Designed to avoid underinsuring a property, this is an endorsement penalizes an insured by paying on a proportionate share of a loss should the policy underinsure the property.

Declaration Page: Usually the first page of a policy, this page provides key information detailing the coverage of the policy, including the named insured, location of property insured, effective dates of policy, limits of policy, and more.

Deductible: An amount specified in the insurance policy that the insured must pay before the policy responds to a claim.

Demolition Costs: Portion of Building Ordinance coverage that pays to destroy the undamaged portion of the premises.

Endorsement: This is a rider or other statement or form that is added to an insurance policy to modify the terms or conditions of the policy.

Exclusion: Specifically identifies a Cause of Loss or Property that will not be covered.

Betterments and Improvements (Additions and Alterations): Normally refers to material changes made in the unit beyond the developer’s standard. Such changes include addition of upgrades, special flooring, added paneling, etc. Clarifying what these items are and how they are insured is critical because CC&Rs (governing documents of the association) and master policies vary considerably in how these are to be insured.

Increased Cost of Construction: The incremental cost attendant to bringing a particular building element up to current building code when that code is different from a “like, kind and quality” replacement of what existed at the time of loss.

Loss Assessment: A coverage included in a personal lines policy that helps pay for any special assessment levied against the owners of the association.

Loss of Income: Coverage designed to reimburse the association or owner of an apartment building for income that is lost as the result of an insured peril. (see ‘Maintenance Fees’ or ‘Loss of Rents’)

Loss of Rents:
Coverage that reimburses Owners of rental income should they become uncollectible because of the occurrence of a named peril.

Occurrence: An incident or event that triggers coverage of an insurance policy.

Retention: See deductible.

 



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