Timothy Cline Insurance Agency, Inc.
Homeowner Associations »
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.