Property coverage basics Featured

8:00pm EDT April 24, 2005
It might be a building, office furniture, fixtures or equipment. It might even be business records or valuable documents.

"It" is property -- and almost all business owners protect it with insurance. But when it comes to insurance, what do we really mean when we talk about property?

* Real property. Land and whatever is affixed to the land. Not many insurance policies use the term real property; most policies cover specified types of real property, such as buildings.

* Personal property. All property other than real property. Insurance professionals commonly refer to personal property usually situated in a building as "contents."

* Tangible property. Property that can be touched (includes real and personal property). Most property insurance policies cover only tangible property.

* Intangible property. Property that cannot be touched because it has no physical existence (e.g. patents, copyrights and trademarks). Most property insurance policies do not cover intangible property.

Typically, property is covered by one section of a larger policy (often referred to as a package policy) that also covers liability and commercial automobiles. The policy's property coverage portion contains several documents, including the declarations page, coverage forms, causes-of-loss forms, conditions and applicable endorsements.

Declarations page

The declarations page serves as a checklist of sorts, providing a description of your protection at a glance. This is the starting point for any review of your policy.

* Description of the property insured

* Kinds and amounts of coverage provided, as well as the selected causes-of-loss form

* List of mortgagees, if any

* Deductible amount

* List of property coverage forms and endorsements

* Applicable coinsurance percentage

* Optional coverages

Property coverage forms -- what's covered, what's not

Property coverage forms contain an insuring agreement and include provisions and definitions that apply to only property. They also describe the property covered and not covered, and set forth additional coverages and coverage extensions.

Some types of property may be excluded because they might be illegal to insure, such as narcotics. Some property, such as building foundations, may not be subject to loss by the perils insured against. Finally, some property might be better insured under other coverage forms.

The coinsurance clause

Look for the coinsurance clause in the conditions section of the property coverage form. This clause requires you to carry insurance equal to at least a specified percentage of the actual cash value of the property insured.

If you carry an insurance amount equal to or greater than the required percentage, the insurer will pay covered losses in full (less the deductible) up to the limit of insurance. If you carry less than the required percentage, loss payments will be reduced proportionately.

You can suspend the coinsurance clause with an option called "agreed value."

Understanding the causes-of-loss form

Your causes-of-loss forms identify the perils covered in a contemporary commercial property policy. There are three types -- basic, broad and special.

The special form is the most common in the marketplace today, primarily because it protects against the most perils. However, one peril not included in any of the causes-of-loss forms is flood. Flood insurance can be purchased from private insurance companies or from the National Flood Insurance Program directly.

Tony Falcone, manager, underwriting practices group, can be reached at (330) 887-0133 or In business for more than 156 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product we offer is peace of mind and our promise of protection is supported by a commitment to service excellence. For more information, visit