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Commercial Insurance FAQs

1. Why do I need to carry business interruption insurance? Answer: Property Insurance policies cover only direct losses to covered property. In many cases, damage to insured property can lead to an indirect loss, usually referred to as a time element or business interruption loss. This is a type of loss caused by a covered peril (fire) but is not caused directly by it. Business Interruption losses can far exceed the claims costs of a property loss. A lack of business interruption coverage is usually the primary cause of business failures after a fire or other catastrophe.

2. What is a co-insurance clause? Answer: A co-insurance clause is a provision in a commercial property policy that requires an insured to maintain insurance equal to a specified percent of the property’s replacement cost value. Failure to do so causes the insured to be penalized and therefore receive a reduced claim payment. The fundamental purpose of co-insurance is to achieve equitable rating for all insured’s. Most property losses are partial losses not total losses. If everyone insured only for the partial loss rather than a total loss premium rates would be much higher.