Property Insurance is any type of insurance that indemnifies an insured party who suffers a financial loss because property has been damaged or destroyed. Property is considered to be any item that has a value. Property can be classified as real property or personal property. Real property is land and the attachments to the land, such as buildings. Personal Property is all property that is not real property. The Building and Personal Property coverage form is the form used to insure almost all types of commercial property. The insuring agreement in the Building and Personal Property coverage form promises to pay for direct physical loss or damage to covered property at the premises described in the policy when caused by or resulting from a covered cause of loss. The following is a brief outline of coverages and how they are used within the Commercial Building and Personal coverage form.

Coverage for the building includes the building and structures, completed additions to covered buildings, outdoor fixtures, permanently installed fixtures, machinery and equipment. The building material used to maintain and service the insured’s premises is also insured. Business Personal Property owned by the insured and used in the insured’s business is covered for direct loss or damage. The coverage includes furniture and fixtures, stock, and several other similar business property items when not specifically excluded from coverage. The policy is also designated to protect the insured against loss or damage to the personal property of others while in the insured’s care, custody or control.

In addition to the limits stated in the Building and Personal Property coverage form, the policy has a coverage extensions section and an additional coverages section. The coverage extensions section provides limited coverage for newly acquired or constructed property, property of others, certain outdoor property, and the cost to research and reconstruct information on destroyed records. When coverage is placed on the all risk form, two additional extensions are added for property in transit and coverage for certain repair costs related to damage caused by water. The two additional extensions are covered by certain perils only. The additional coverage section provides coverage for indirect losses that result from a direct loss. The coverage applies to removal of debris, preservation of property, fire department service charges and pollutant cleanup and removal. The coverage extensions and the additional coverages have limitations and are subject to certain conditions.

The most an insurer will pay for loss or damage in any one occurrence is the limit of insurance stated in the policy declarations.

The standard deductible is $250. However, other deductible amounts are available and the deductible applies only once per loss.

The term peril is used when discussing losses. A peril is a cause of loss. Basic property insurance policies are written to cover the perils of fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. Other property insurance policies often referred to as the broad form policy, add coverages for water damage, weight of snow, ice or sleet, breakage of glass and coverage for falling objects. The broadest coverage is the special form, which is best known as the all risk form. All risk covers all causes of loss, except those specifically excluded from coverage. It is possible for a commercial property policy to have more than one cause of loss form.

Property can be valued in several different ways. Insurance companies commonly use two approaches to determine value, which also determines how a loss will be paid; the replacement cost method and the actual cash value method. Insurers consider replacement cost of a property item to be the cost to replace it with new property of like kind. Actual cash value is replacement cost, minus the accumulated depreciation for age and condition.

When the agreed value option is used the coinsurance requirement is removed and the insurer agrees to cover loses for it’s agreed value. As an example, the insured has property insured for $100,000 and the agreed value is also $100,000, if a loss occurs, any loss up to $100,000 is covered at 100%. When this option is used the insured and the insurance company agree on the value of the property before the policy is issued. This option is usually assigned to one-of-a-kind property.

Most building and business personal property policies have a coinsurance clause, which requires the insured to carry insurance equal to at least a specified percentage of the actual cash value of the property. If a loss occurs, and it is determined that the amount of insurance carried is less than the amount required, a penalty could be placed on the insured.

An insured can insure a building for its full value at the beginning of the policy year, but, at the end of the year, it might not be covered for it’s full value. This problem can be corrected by adding inflation guard coverage. With inflation guard, the policy limit increases gradually during the policy term so that the total increase amounts to the desired percentage increase at the end of the policy term.

This endorsement extends your cause of loss to include damage that results directly from an earthquake. Coverage is provided for replacement of buildings only. All earthquake shocks that occur within a 168-hour period (one-week) are considered to be a single occurrence. A separate deductible applies and is determined by the value of the insured property.

The Commercial General Liability Policy provides the insurance protection needed to pay damages for bodily injury or property damages for which the insured is legally responsible. The policy provides coverage for liability arising from personal injury and advertising injury. Coverage for medical expense is also provided. The policy also covers accidents occurring on the premises or away from the premises. Coverage is provided for injury or damages arising out of goods or products made or sold by the named insured. The insured is the named insured and the employees of the named insured. However, several individuals and organizations, other than the named insured, may be covered, depending upon certain circumstances specified in the policy. In addition to the limits, the policy provides supplemental payments for attorney fees, court costs and other expenses associated with a claim of the defense of a liability suit.

There are two commercial general liability coverage forms available, the occurrence form and the claims made form. Both forms are somewhat identical in the coverages offered. The main difference is in the way claims are handled under the two forms. The occurrence form covers bodily injury or property damage claims that occur during the policy term, regardless of when the claim is reported. The claims made policy form only covers claims made against the insured during the policy term. A claim made after the policy expires is not covered by a claims-made policy unless the claim is covered by an extended reporting period. The claims-made policy will only have the extended reporting period. The claims-made policy will only have the extended reporting period. The following terms reflect both forms.

The General Aggregate Limit is the most money the insurer will pay under certain coverage for all claims occurring during the policy term.

Coverage is provided for damages arising out of ownership or occupancy of the insured premises when not maintained in a reasonable manner. This also covers damages arising out of operations performed by the insured business.

Products coverage is provided for damages arising out of products manufactured, sold, handled or distributed by the insured. Completed Operations covers damages occurring after operations have been completed or abandoned, or after an item is installed or built and released for it’s intended purpose.

Medical payments coverage pays medical expenses resulting from bodily injury caused by an accident on premises owned or rented by the insured, or locations next to such property, or when caused by the insured’s operations. These payments are made without regard to the liability of the insured.

The fire damage limit provides coverage for fire damage caused by negligence on the part of the insured to premises rented to the named insured. If a fire occurs because of negligence of the insured and causes damage to property not rented to the insured, coverage would be provided under the occurrence limit.

Personal Injury means injury other than bodily injury. Coverage is provided for injury resulting from offenses such as false arrest, malicious prosecution, detention or imprisonment, the wrongful entry into, wrongful eviction from and other acts of invasion, or rights of private occupancy of a room. Coverage for libel and slander is also provided in the policy.

This coverage pays for damages done in the course of oral or written advertisement that disparages, libels or slanders a person’s or organization’s goods, products or services. Coverage for these offences is provided under advertising injury coverage only if they occur during the course of advertising the named insured’s own goods, products or services.

Each occurrence is considered to be an accident, which could include continuos or repeated exposure to the same harmful conditions. An occurrence can also be a sudden event, or a result of a long-term series of events.

The liability coverage of the commercial auto policy provides protection against legal liability arising out of the ownership, maintenance, or use of any insured automobile. The insuring agreement agrees to pay damages for bodily injury or property damages for which the insured is legally responsible because of an automobile accident resulting from the ownership, maintenance, or use of a covered auto. The insuring agreement also states that in addition to the payment of damages for which the insured is legally liable for, the insurer also agrees to defend the insured for all legal defense cost. The defense cost is in addition to the policy limits.

The insuring agreement states that the insurer will pay all reasonable and necessary medical and funeral expenses incurred by an insured because of bodily injury caused by an accident. The insured is the named insured, the insured’s employees and guests, and any other person occupying a covered auto. These payments are made without regard to fault.

Uninsured Motorist

This insuring agreement pays for bodily injury to an insured who is injured by an uninsured motorist, a hit-and-run driver, or a driver whose insurer becomes insolvent. These benefits are paid under the named insured’s policy.

This coverage is added to supplement the Uninsured Motorist Coverage, the coverage applies only when the other driver has liability limits at the time of the accident, but the liability limits carried may be insufficient to pay for damages for which the driver is responsible. This is when the insured’s underinsured motorists coverage would apply and payment for the difference could be made. The two coverages are mutually exclusive and do not overlap or duplicate each other.

Coverage is provided for any auto is provided for any auto, including autos owned by the insured, autos the named insured hires or borrows from others, and other non-owned autos used in the insured’s business.

Coverage is provided for all autos owned by the named insured. The owned auto symbol is used for liability insurance only.

Coverage is provided only for autos not owned, leased, hired, or borrowed by the named insured. Coverage includes autos owned by the insured’s employees or members of their households, but only while used in the named insured’s business or personal affairs.

Coverage is provided only for autos owned, leased, hired, rented or borrowed for use in the named insured’s business.

Collision Coverage

This coverage provides protection against loss or damage to a covered auto or a non-owned auto resulting from the impact with another vehicle or object. Collision losses are paid regardless of fault.

Comprehensive coverage provides protection against loss or damage to a covered auto resulting from loss other than collision or upset. This coverage also provides for supplemental payments for transportation expenses in the event of total theft or a covered auto or a non-owned auto. Coverage begins forty-eight hours after the theft.

This provides coverage against loss from fire, lightning, or explosion; theft; windstorm, hail, or earthquake; flood; mischief or vandalism; and sinking, burning, collision or derailment of a conveyance transporting the covered auto.

Rental Reimbursement

The business auto policy provides a coverage extension if an auto is insured for comprehensive or specified cause of loss coverage which insures against loss of use of a covered auto only if the auto is a private passenger type auto and is stolen. The coverage extension pays up to a daily limit of $10 and maximum limit of $300. Payments begin forty-eight hours after the theft and ends when the insured auto is returned or when the insurer has paid the insured for the auto.

However, for broader coverage the insured can pay an additional premium for rental reimbursement coverage. Rental reimbursment pays the cost of renting a substitute auto for replacement of any coverage auto that had suffered a loss. The daily maximum limit for this coverage varies among insurers.

When this coverage is added, the insurer pays for towing and labor costs each time a covered auto or non-owned auto is disabled, up to a stated amount.

The property covered on the contractors equipment floater might range from simple hand tools to very large cranes. Virtually any type of mobile equipment or tool can be insured. The equipment covered can be used to build roads, buildings, pipelines, or many other types of structures. The coverage provided is for direct physical loss to the equipment. Rental reimbursement coverage can be added by endorsement to cover the cost of renting substitute equipment if covered property is out of service by a covered cause of loss.

The inland marine builders risk portion of the policy form covers structures being built, temporary structures at the building site, and building materials that have not yet become part of the building. The building materials are covered while on the insured location, in transit, or in storage at another location. Business income coverage can also be provided on the policy. The installation portion of the policy usually insures a contractor’s interest in building supplies or in fixtures that the contractor has been hired to install.

The inland marine electronic data processing policy is used to insure damage to data processing hardware, software and media. The policy also covers the extra expense to continue data processing operations following a covered loss that resulted in damage to the system.

This coverage agreement obligates the insurer to pay all compensation and other benefits required of the insured by the workers compensation law or occupational disease law of any state listed in the policy. The coverage applies to bodily injury by accident and by disease.

This coverage protects the employers for their legal liability for bodily injury by accident or disease to an employee arising out of and in the course of the employee’s employment when not covered under the workers compensation law. Before benefits are paid under this coverage, the employee must prove the employer is liable for the injury.

This amount is the most an insurer will pay for all claims arising from any one accident, regardless of how many employees are involved in the accident. The statutory limit is $100,000 for any one accident, which can be increased.

This is the aggregate limit the insurer will pay for all claims sustaining bodily injury by disease during the policy period. The statutory policy limit is $500,000, which can be increased.

This amount is the most an insurer will pay for damages due to bodily injury by disease to any one employee. The statutory limit of liability for each employee is $100,000, which can be increased.

This provides workers compensation coverages if the insured expands operations into other states not declared at the time the policy is issued or renewed. If the insured elects this coverage and operations begin in a state listed under other states, the insurer provides the same coverage as if the state was declared in the policy at the time of policy issuance.

In some states, like New Mexico, workers compensation law allows an insured to include or exclude Executive Officers and Partners, or both, form coverage. Adding this endorsement can designate the individuals not covered under the policy.

This is a factor that deals with the rating of the policy. The Experience Modification figure is based on the insured’s loss experience. The factor is used to increase or decrease the manual rates of insurance.

Umbrella liability insurance provides excess liability coverage over several of the insured’s primary liability policies. Most umbrella liability policies provide coverage that is broader than the insured’s primary policies. An excess liability policy may be what is called a following form policy, which means it is subject to the same terms as the underlying policies; it may be a self-contained policy, which means it is subject to its own terms only; or it may be a combination of these two types of excess policies. Umbrella policies have three functions: (1) To provide additional limits above the each occurrence limit of the insured’s primary policies; (2) To take the place of primary insurance when primary aggregate limits are reduced or exhausted; and (3) To provide broader coverage for some claims that would not be covered by the insured’s primary insurance policies, which would be subject to the policy retention. Most umbrella liability policies contain one comprehensive insuring agreement. The agreement usually states it will pay the ultimate net loss, which is the total amount in excess of the primary limit for which the insured becomes legally obligated to pay for damages of bodily injury, property damage, personal injury, and advertising injury.

All umbrella liability policies contain an each occurrence limit of insurance. Some umbrella liability policies may have a separate limit that applies to all personal and advertising injury for one person or for the organization. Also, some policies are written with aggregate limits for only one type of loss. Other policies may have one or more aggregates for all losses. Umbrella policies can be written with several different variations of the aggregate limits. There are no standard umbrella policies.

The self-insured retention is the amount of the loss an insured must pay before the umbrella policy would be required to respond. The self-insured retention would only apply when a loss is excluded from coverage under the primary policy, but not excluded under the umbrella policy.

Required Underlying Limits is a requirement of the insurer. It requires the insured to have certain types and amounts of primary insurance before the umbrella policy can be written.

Contract bonds are those that guarantee the performance of a contract. The contract may be for the construction of a school building; or a road; to supply food to the county jail; or gasoline to the highway department.

Contract bonds are among the most hazardous of all bonding. Basic to the risk is that the principal will stay in business. Once the bond is signed, the bonding company has little or no escape. Even the banker who lends his money to the contractor has no comparable risk. If he calls his loan and gets his money, he is free and clear. The bonding company must remain to see to it that the terms of contract are carried out and that his debts are paid.

Bonds guaranteeing contracts for the construction of buildings, roads, and sewers. The demand comes largely from Governmental and other public bodies, which are required by law to award contracts for public work to the lowest responsible bidder.

It is customary for the owner or the public body to require all contractors wanting to bid on a project to furnish a bid bond guaranteeing that he will accept the contract at the price and according to the conditions required. The bid bond ensures that the contractor can "make bond" with a qualified surety.

The Contract bond is quite as simple an instrument as is any other Surety bond. The obligation is merely that the contractor will do the job in accordance with the contract, plans, and specifications, which are made part of the bond. Hence, the bond covers whatever the contract covers.

Sometimes the bond is for the benefit of the obligee or owner only. Usually, when covering public work, it is also for the benefit of any material house and workman having anything to do with the carrying forward of work. This means that, if the contractor does not pay his material bills, the material supply house has a direct claim against the bond. This holds true also for the laborer or sub-contractor who has not been paid for his work.

While the Performance bond guarantees the owner that his contract will be performed according to its terms, and that the completed building will be turned over to him free and clear of liens for unpaid bills, the Performance bond does not directly guarantee that the laborer who did the work or the materials company which furnished the materials will be paid.

If such people failed to file liens, or failed to comply strictly with the statues relating to the filing of claim against bonded public work, they had little benefit from a Surety bond. Therefore, many public bodies amended their bonds to require that the Suretyship would be also "for the benefit of any laborer or materialsman" who had furthered the bonded contract.

Practically all-public work today is awarded to the lowest responsible bidder. Each bidder is required to guarantee that his bid is bona fide by posting an Indemnity bond, which is forfeited if the contractor fails to enter into the contract if awarded to him.

The bid bond involves exactly the same underwriting, as does the Contract bond itself. In fact, the Contract bond can be underwritten more precisely, because the adequacy of the contractor’s price can be determined by comparing it with the bids submitted by the other bidders. The same form of application is used for a Bid bond as for the Construction bond, and the same information must be given.