Multi-Family Complexes (Apartment and Condo): An In-Depth Look at Insuring the Many Exposures and Losses
lower building insurance rate. Other personal property not so listed must be covered, either specifically or under blanket coverage with the buildings, using the personal property insurance rate.
Generally, insurance with at least an 80 percent coinsurance clause (unless replaced by an agreed value clause) is required, or if multiple buildings are involved, blanket insurance for 90 percent of current value is suggested. Also recommended—especially with buildings more than one or two years old—is replacement cost coverage, which covers the cost of replacing new for old, with no deduction for depreciation as would be the case with actual cash value (ACV) coverage.
Additional Coverages—Coverage Extensions
In addition to the basic buildings and personal property coverages, most forms also provide a number of additional coverages and coverage extensions. Below is a summary of these as provided by the ISO form: (Refer to the form itself for various limitations and exclusions found in these sections.)
4a) Debris removal, pays up to 25 percent of the amount of the loss (not exceeding the limit of insurance for the combined loss) plus $10,000 (can be increased);
4b) Preservation of property removed to protect it from loss or threatened loss for up to 30 days;
4c) Fire department services charges, up to $1,000 with no deductible;
4d) Pollutant clean-up and removal, up to $10,000 (can be increased);
5a) Newly acquired or constructed property, for 30 days or until policy expires if earlier, $250,000 buildings, $100,000 business personal property;
5b) Personal effects and property of others, up to $2,500;
5c) Cost of research, valuable papers and records, up to $2,500 (can be increased);
5d) Property off premises (except in or on a vehicle, in custody of insured’s salespeople, or at a fair or exhibition), up to $10,000;
5e) Outdoor property, as listed, against limited listed causes of loss for no more than $1,000 ($250 per tree, shrub, or plant) per occurrence.
Each of items 5a through 5e is additional insurance with no coinsurance applying, but
applies only when 80 percent or higher coinsurance or equivalent is used on the basic property insurance.
Covered Causes of Loss
Three levels of choice of covered causes of loss (formerly referred to as “perils insured against”) are generally available, although there are considerable variations in the details of coverage from one insurer to another. Care should be taken to compare the list of covered and excluded or unmentioned causes of loss when comparing coverage choices.
Basic coverage includes only a limited group of covered causes of loss—fire, lightning, wind and hail (excluded in some hurricane-prone areas), explosion, damage by aircraft or vehicles, and riot or civil commotion, and usually vandalism or malicious damage, along with sprinkler leakage for buildings with automatic sprinklers, sinkhole collapse (but not mine subsidence), and volcanic action. Although the least expensive form, this form should be avoided as there are too many other perils not covered here that can also produce severe loss. Its most common use is as a means for underwriters to provide minimal coverage for substandard properties.
Broad Form coverage expands the list of causes of loss to include falling objects, weight of snow, ice or sleet, and water damage (but not flood or overflow of natural bodies of water, or sewer backup) and, as “additional coverages,” glass breakage and a limited form of collapse.
Special Form coverage applies to any risk of direct physical loss not otherwise excluded