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FIL 350 - Chapter 4
Optional Commercial Property Coverage Options
| Question | Answer |
|---|---|
| Manufacturer’s Selling Price endorsement | Finished, but unsold goods manufactured by the insured are valued at selling price, less any discounts and expenses the insured would have had |
| Functional Building Valuation Endorsement | Covers cost to repair or replace the building with a less costly building that is functionally equivalent to the original upon loss when replacement cost exceeds market value |
| Specific Insurance | Separate, specified limits of insurance in declarations for each insured building or personal property insured at each location |
| Blanket Insurance | Coverage for either one or multiple types of property in one or multiple separately rated buildings with one limit of insurance |
| Peak Season Limit of Insurance Endorsement | Differing amounts of insurance are provided for selected time periods during the policy period to cover fluctuating values of business personal property |
| Value Reporting Form | Used to insure fluctuating personal property. Premiums are based on the average of value of business reports throughout the year of merchandise values; insurance is adjusted to reflect the current value; for fluctuating inventory values |
| Ordinance or Law Coverage Endorsement | Coverage for losses caused by regulations. Options include: A. losses for undamaged property that must be demolished. B. Costs for demolition and debris removal. C. increased costs due to upgrades in building code |
| Utility Services-Direct Damage Endorsement | Covers damage by a covered peril to the interruption of water, communication, or power supply property services |
| Spoilage Coverage Endorsement | Covers spoilage of perishable stock due to power outages or temperature changes, humidity changes, or contamination from mechanical failure of cooling or humidity apparatuses |
| Radioactive Contamination Endorsement | Covers direct physical damage caused by sudden and accidental radioactive contamination not including damage from a nuclear reactor |
| Functional Personal Property Valuation | Endorsement that provides functional valuation for personal property such as older machinery that is no longer available |
| What is the minimum coinsurance requirement for blanket insurance? | 90% |
| What is a margin clause? | In blanket insurance, it limits the total recovery based on a specific percentage above filed amounts in the statement of values |
| How is the limit of insurance set for a value reporting form? | It should be set high enough to cover the maximum expected values at any time in the policy period. |
| What does the insured need to do to receive full reimbursement for a loss under the value reporting form? | Report property values accurately and on time; if this is done, loss is still covered if values on hand at time of loss are greater than last reported values |
| How is the final premium calculated under a value reporting form? | It is the average of the values reported multiplied by the applicable rate. |
| How long does the insured have to file the required report under a value reporting form? | 30 days within the end of each reporting period; extra time (60 days) is allowed for the very first report. |
| What happens if a loss occurs under the value reporting form and the insured failed to complete the first required report (usually the January report)? | Insurer will pay 75% of what they otherwise would have paid |
| What happens if an insured misses a report other than the first report and a loss occurs? | Insurer will pay no more than the last reported value (the previously filed report) |
| How much does the insurer pay in the case of an inaccurate report? | use the coinsurance penalty: (did/should)*Loss less the deductible. Did is the amount the company DID report, should is the actual value of inventory |
| Business Personal Property- Limited International Coverage | Extends coverage territory to include property in or en route to/from specified foreign coverage territory (if at property owned/operated by insured or with representative) |
| Property in Process of Manufacture by Others- Limited International Coverage | Business personal property coverage is extended to include raw materials and in-process goods while being manufactured in a foreign coverage territory at a location not owned, operated, or leased to the insured |
| Manufacturer's consequential Loss Assumption | Endorsement that provides coverage for undamaged stock that has lost its value due to other damaged/destroyed stock. (Ex: front of clothing is destroyed, so remaining parts of that clothing item is now of scrap value) |
| Brands and Labels Endorsement | Permits the insured to stamp "salvage" or remove brands/labels on merchandise after loss (without damaging it) so that their reputation is not damaged due to property the insurer now has the right to |
| Increased Cost of Loss and Related Expenses for Green Upgrades | Endorsement to cover replacement of damaged property with more environmentally friendly materials. Can include higher costs for more expensive materials, extra expenses for green design, and business income coverage |
| Additional Covered Property endorsement | Provides coverage under the BPP for selected property that would otherwise not be covered. |
| When compared to specific insurance, what is the advantage of blanket coverage? | may get more coverage for large loss events, full amount of debris removal coverage may be available, deductible may be easier to meet for small losses |
| When compared to specific insurance, what is the disadvantage of blanket coverage? | it is generally more expensive since you need more coverage and you get no rate discount - the coinsurance requirement is 90% and unlike specific insurance, there is no discount for selecting the higher coinsurance requirement |
| statement of values form | required by insurers, it lists the values and locations of all property that will be covered under blanket insurance |
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FIL350
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