Commercial Property Insurance Glossary

Replacement cost: The cost to rebuild or replace a building with like kind and quality at today's prices, with no deduction for age. It is the basis lenders require and the right basis for a commercial building, because it reflects what reconstruction actually costs. Learn more →
Actual cash value (ACV): Replacement cost minus depreciation, the value of property after accounting for age and wear. An ACV settlement, common on older roofs, can pay far less than it costs to replace the damaged component. Learn more →
Coinsurance: A policy clause requiring you to insure a building to a stated percentage of its replacement cost. If your limit is below that threshold at a loss, the insurer pays only a proportion of the claim, even a partial one, and you absorb the rest. Learn more →
Ordinance and law: Coverage that pays the extra cost of rebuilding to current building codes after a covered loss, including demolition of undamaged portions and the increased cost of code-compliant construction. A standard policy does not cover these on its own. Learn more →
Business income and rental value: Coverage that replaces lost rental income and continuing expenses after a covered physical loss makes a building unusable, for the period it takes to rebuild. It generally requires a covered cause of loss, and the period of restoration caps how long it pays. Learn more →
Equipment breakdown: Coverage for the sudden, accidental failure of a building's mechanical, electrical, and pressure systems, such as HVAC, boilers, and electrical distribution, which a standard property policy excludes. Learn more →
Lessor's risk only (LRO): Liability coverage for an owner who leases commercial space to tenants, protecting against third-party injury and property-damage claims arising from the premises. It is distinct from the property coverage on the building. Learn more →
Mortgagee clause: Policy wording that names the lender on a property policy and grants it protections, including payment for a covered building loss and, in many forms, protection even if the borrower acts in a way that would otherwise void coverage. Learn more →
Loss payee: A party named to receive payment for a covered loss, generally without the broader protections a mortgagee clause provides. Lenders typically require mortgagee status on property and additional insured on liability. Learn more →
Additional insured: Status that extends a liability policy to protect another party, such as a landlord on a tenant's policy or a lender on an owner's, for claims arising from the insured activity or property. Learn more →
Waiver of subrogation: A provision under which an insurer agrees not to pursue recovery from a third party after paying a claim. Mutual waivers in a lease keep a covered property loss from becoming a lawsuit between landlord and tenant. Learn more →
Certificate of insurance (COI): A document summarizing a policy's coverages and limits. It proves a policy exists but grants no rights on its own; an endorsement is what actually amends the policy, for example to add an additional insured. Learn more →
Single-purpose entity (SPE): An entity formed to own one property and nothing else, isolating that asset and its liabilities. Lenders often require an SPE, and the insurance must name that entity and carry the required lender wording. Learn more →
Blanket vs scheduled coverage: Scheduled coverage assigns a separate limit to each building; blanket coverage shares one limit across several, so the full limit can respond wherever a loss occurs. Blanket can soften underinsurance on any one building. Learn more →
Vacancy clause: A policy provision that reduces or suspends certain coverages once a building has been vacant beyond a set period, commonly sixty days, leaving losses during the empty stretch limited or excluded. Learn more →
FAIR Plan: A state-backed insurer of last resort that provides basic property coverage for buildings that cannot find coverage in the normal market, usually because of wildfire risk. It generally excludes liability and is paired with a separate wrap. Learn more →
TWIA: The Texas Windstorm Insurance Association, which provides windstorm and hail coverage in designated coastal catastrophe areas where the standard market excludes wind. It is not an all-perils policy. Learn more →
Difference-in-conditions (DIC): A specialty policy that adds back perils a standard policy excludes, often including earthquake and certain flood, and is frequently used alongside a FAIR Plan on hard-to-place property. Learn more →
DSCR: Debt-service coverage ratio, a lender's measure of a property's income against its debt payments. It is why steady rent, and the business income coverage that protects it, matters to financing. Learn more →
Period of restoration: The window during which business income or rental value coverage pays, running from the date of loss until the property should reasonably be repaired. A period set too short stops paying before a long rebuild finishes. Learn more →

The terms, in plain English.

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