Key Words

Question 1

Actual Cash Value

Answer 1

the amount equal to the replacement cost, minus depreciation of damaged or stolen property at the time of loss.

Question 2

Agreed Value

Answer 2

an “upfront agreement” between the insured and the insurance company on the fixed value of property

Question 3

Agreed Value Provision

Answer 3

an insurance provision through which the insurer agrees to waive the coinsurance requirement; insurers will require a Statement of Values—signed by the policyholder—as a condition for activating or including this in a policy

Question 4

Bailee

Answer 4

the party to whom personal property is delivered and entrusted (without transfer of ownership) for a specific purpose

Question 5

Blanket Insurance

Answer 5

a property insurance policy with a single limit that covers more than one type of property at the same location; the same kind of property at multiple locations; or multiple kinds or property at two or more locations

Question 6

Building

Answer 6

includes the building structure, along with any completed additions, fixtures, permanently installed equipment, as well as any personal property used to maintain the premises

Question 7

Business Income

Answer 7

the net income (net profit or loss before taxes) that would have been earned or incurred, plus continuing normal operating expenses (including payroll)

Question 8

Business Personal Property

Answer 8

includes furniture and fixtures, equipment, stock, the cost of labor, and any improvements or betterments

Question 9

Causes of Loss Forms

Answer 9

policy forms which define the covered perils to which insurance applies; three types of Causes of Loss forms apply to commercial property insurance: the Basic Form, the Broad Form, and the Special Form

Question 10

Coinsurance Clause

Answer 10

a property insurance provision that penalizes the insured’s loss recovery if the limit of insurance purchased by the insured is not equal to or greater than a specified percentage (commonly 80 percent) of the value of the insured property

Question 11

Concurrent Causation

Answer 11

when a loss is caused by two perils

Question 12

Concurrent Causation Exclusions

Answer 12

holds that if a loss is caused by two perils, one of which is clearly excluded and one of which is not excluded, the policy must pay for the loss caused by the peril that is not excluded

Question 13

Conditions

Answer 13

policy terms which outline the provisions that control how a policy operates

Question 14

Coverage Territory

Answer 14

the geographical area within which insurance coverage applies

Question 15

Declarations

Answer 15

the front page (or pages) of a policy that specifies the named insured, address, policy period, location of premises, policy limits, and other key information that varies from insured to insured; also known as the information page

Question 16

Deductible

Answer 16

an amount the insurer will deduct from the loss before paying a claim up to its policy limits

Question 17

Depreciation

Answer 17

an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy; represents how much of an asset’s value has been used up

Question 18

Dependent Properties

Answer 18

other enterprises upon which the insured business depends in order to remain operational at normal levels; four classifications include: contributors, recipients, manufacturers, and leaders

Question 19

Direct Loss

Answer 19

loss incurred due to direct physical damage to property, as opposed to time element or other indirect losses

Question 20

Endorsements

Answer 20

policy provisions that modify the basic policy to either add, delete, or exclude certain types of coverage

Question 21

Extra Expense

Answer 21

the additional costs, in excess of normal operating expenses, that an organization incurs in order to continue operations while its property is being repaired or replaced after having been damaged by a covered cause of loss

Question 22

First Named Insured

Answer 22

the person or entity listed first on the policy Declarations page as an insured; this primary or first named insured is granted certain rights and responsibilities that do not apply to the policy’s other named insureds

Question 23

Functional Replacement Cost

Answer 23

the cost of acquiring another item of property that will perform the same function with equal efficiency, even if it is not identical to the property being replaced

Question 24

Indemnity

Answer 24

when the insured is protected from loss by the insurer; to “make whole again”

Question 25

Indirect Loss

Answer 25

loss resulting from the inability to use damaged property

Question 26

Inflation Guard

Answer 26

a provision that gradually and continuously increases the limit of insurance by a specified percentage over a specified time period

Question 27

Insurable Interest

Answer 27

an interest the insured has in the value of the subject of insurance, including any legal or financial relationship; usually results from property rights, contract rights, and potential legal liability

Question 28

Insurance-to-Value Requirement

Answer 28

a required amount of insurance equal to a specific percentage of a property’s value

Question 29

Margin Clause

Answer 29

a commercial property insurance provision stating that the most the insured can collect for a loss at a given location is a specified percentage of the values reported for that location on the insured’s Statement of Values

Question 30

Named Perils

Answer 30

a property insurance term referring to policies that provide coverage only for loss caused by perils specifically listed as covered

Question 31

Open Perils

Answer 31

a property insurance term referring to policies that insure against loss to covered property from all causes except those that are specifically excluded

Question 32

Period of Restoration

Answer 32

the period of time after a direct physical loss to covered property that ends when the property should be repaired or replaced at a reasonable speed, or when the business is resumed at a new location

Question 33

Personal Property

Answer 33

all tangible property not classified as real property

Question 34

Personal Property of Others

Answer 34

property of others in the insured’s care, custody, or control

Question 35

Provisional Premium

Answer 35

a premium “deposit” an insured makes when using a Value Reporting Form endorsement; an advance premium based on 75% of the policy limit

Question 36

Real Property

Answer 36

land and most things attached to the land, such as buildings and vegetation, which are subject to titled ownership

Question 37

Replacement Cost

Answer 37

the amount of money a business must currently spend to replace an item of property with one of same or higher value

Question 38

Scheduled Insurance

Answer 38

a property insurance policy that itemizes separate limits which apply to each type of covered property interest (building, personal property, business income, etc.) at each covered location

Question 39

Specific Insurance

Answer 39

separate property insurance policies with a limit that applies to one location

Question 40

Statement of Values

Answer 40

a list of insured property that includes the value of each item expressed either in terms of its replacement cost or actual cash value; submission at the beginning of the policy term is required in order to obtain Agreed Value coverage

Question 41

Stock

Answer 41

merchandise held in storage or for sale; raw materials and in-process finished goods, including supplies used in their packing or shipping

Question 42

Tenant’s Improvements and Betterments

Answer 42

permanent additions or changes made to a building by a lessee at his or her own expense that may not legally be removed

Question 43

Use Interest

Answer 43

the insurable interest a tenant has in the improvements and betterments they have installed at their own expense, but which they do not own

Question 44

Valuation

Answer 44

an estimation of an item of property’s worth; the amount of money the policyholder will receive from the insurance provider if a covered hazard event occurs

Question 45

Value Reporting Form Endorsement

Answer 45

intended for insureds whose personal property values fluctuate in both time and amount