What is the difference between replacement cost (RC) and actual cash value (ACV)?

Replacement cost and actual cash value are terms used to describe how a particular piece of property (e.g., a building, furniture, electronics, etc.) is valued for insurance purposes. Insurance companies provide coverage for property based on either its replacement cost or its actual cash value.

Replacement cost refers to what it would cost to replace property at the time of the loss, at current prices. Actual cash value refers to today’s cost, less depreciation.

What is the coinsurance clause in a commercial property insurance policy?

The coinsurance clause requires policyholders to insure their property at an amount that is greater than or equal to a certain percentage—usually 80%, 90% or 100%—of its total value. If your business property is not adequately insured to value and you have a loss, you will incur an insurance penalty.

If your property insurance policy has an 80% coinsurance penalty, you must insure your property to at least 80% of its replacement cost in order to avoid the coinsurance penalty if you have a loss.

What is business interruption, or extra expenses coverage?

Business interruption insurance (or, business income insurance, extra expenses coverage) reimburses you for lost revenues when your business is unable to operate after a disaster. It reimburses you for lost income as well as extra expenses you will incur if you have to establish a temporary worksite while rebuilding or making repairs.

Business interruption coverage is added to a commercial property or business owners policy.

What is the difference between a “named insured,” “first named insured,” and “additional insured” on a commercial general liability policy?

The declarations page, or front page of a commercial insurance policy may list a “named insured,” “first named insured,” and “additional insured(s).”

Named insureds are those listed by name on the policy’s declarations page. The named insured is typically one person, partnership, corporation or other entity with insurable interests; however, multiple named insureds may be listed.

The first named insured is the named insured listed first on the policy’s declarations page. This insured acts as the legal agent for all other named insureds in initiating policy cancellation, requesting policy changes or accepting any returned premiums. The first named insured may also be responsible for payment of the policy premiums.

An additional insured is an entity to which the policy’s coverage is extended. An additional insured must be added to the policy prior to a claim being paid, and there must be a relationship between the named insured and the additional named insured.

What is commercial general liability insurance?

Commercial general liability insurance provides coverage if your business is negligent and causes bodily injury or property damage to others on your business premises or in the course of performing normal business operations. It also provides coverage for bodily injury and property damage caused by products your company has manufactured or sold.

What is products-completed operations coverage?

Products-completed operations coverage refers to liability coverage for bodily injury or property damage to third parties caused by your products or after your operations have ceased or been abandoned, or after the products are out of your control.

Products-completed operations coverage is usually included as part of a commercial general liability policy, but additional coverage can be purchased as needed.

What is fire damage legal liability, or fire legal coverage?

Fire damage insurance is part of a commercial general liability policy. It provides coverage if your business causes fire damage to a rented property. Your business must be legally liable for the fire damage in order for the coverage to apply.

Why do I need certificates of insurance from sub-contractors?

Certificates of insurance from sub-contractors show proof that a contractor you have hired has business insurance. Requiring subcontractors to show proof of insurance protects you from working with uninsured or underinsured contractors and being financially responsible for their mistakes.

How does a workers’ compensation payroll audit work?

Your workers’ compensation coverage and premium is based on estimated payrolls. At the end of the policy term, the workers’ compensation insurance company will review the policy and issue either an additional charge or a credit based upon the payroll audit. Audits may be performed onsite by an auditor or via mail or telephone.

Can other people drive my business vehicle?

Other people may drive your business vehicle with your permission, however, it is important to list on your commercial auto insurance policy anyone who regularly drives your business vehicle.