The Commercial Property coverages you select for your clients can have a large
impact on the settlement of a claim. The broadest Cause of Loss is Special Form
as opposed to Basic or Broad. The valuation of Replacement Cost (RC) vs Actual
Cash Value (ACV) is another important decision.
While you want to provide the best coverages possible, Special and RC are only available in certain circumstances. To qualify, some insurance companies require structures older than 35 years to have building systems (electrical wiring, heating, plumbing, and roof) completely replaced. They may accept inspections by a qualified contractor within the last 5 years to determine it meets local building codes. Another requirement for RC is an adequate limit per square foot. The correct co-insurance percentage needs to be selected based on the amount of insurance carried compared to the cost to replace. With buildings aging and the increased costs of construction, 80% coinsurance is safer than 100% to avoid a co-insurance penalty if a limit is too low.
Basic Form can be considered “named perils” by listing causes that are covered. Opposed to that, Special Form is referred to as “all risk” by covering exposures not specifically excluded. Special also includes additional coverages and extensions not otherwise available.
Please contact our underwriters at Erickson-Larsen Inc and Bjornson/Sentinel-E&L for help writing your next commercial account. Visit our website for more information: www.ericksonlarseninc.com.
Disclaimer: This post is intended for general information purposes only. The information is not intended to constitute and should not be considered legal or professional advice, nor does it represent any policy coverage.