North Dakota Commercial Property Insurance

Commercial property insurance is essential for North Dakota businesses to protect their physical assets and maintain operations following covered losses.

Commercial Property Coverage Forms

Building and Personal Property Coverage (BPP)

The BPP form is the foundation of commercial property coverage:

Covered Property Examples

Building Coverage Includes:

• Building structure and foundation
• Completed additions
• Fixtures and outdoor fixtures
• Permanently installed machinery
• Personal property used to maintain building (appliances, floor coverings)

Business Personal Property Includes:

• Furniture and fixtures
• Machinery and equipment
• Stock and inventory
• Tenant improvements
• Supplies

Causes of Loss Forms

Three Coverage Options

North Dakota Weather Considerations

For commercial properties, weather-related exposures are critical:

Business Income Coverage

What Business Income Covers

Business income coverage (also called business interruption) pays for:

Business Income Formula

$\text{Business Income} = \text{Net Income} + \text{Continuing Operating Expenses}$

Coverage Period

• Begins 72 hours after direct physical loss (standard waiting period)
• Continues during Period of Restoration
• Ends when property is repaired/replaced or business resumes
• Extended Period coverage available for ramp-up time

Coinsurance for Business Income

Business income policies typically require 50%, 60%, or 80% coinsurance:

$\text{Coinsurance Requirement} = \text{Annual Business Income} \times \text{Coinsurance \%} \times \frac{12}{\text{Period of Indemnity Months}}$

Exam Tip: Understand how business income coinsurance differs from property coinsurance. It's based on projected annual business income, not property value.

Coinsurance in Property Insurance

The Coinsurance Clause

Most commercial property policies include an 80% coinsurance clause:

• Must insure property at 80% of replacement cost
• Penalty for underinsurance at time of partial loss
• Full losses paid up to policy limit regardless

Coinsurance Penalty Formula

$\text{Amount Paid} = \frac{\text{Amount Carried}}{\text{Amount Required}} \times \text{Loss} - \text{Deductible}$

Example Calculation

Scenario:

• Building value: $500,000
• Coinsurance: 80%
• Coverage carried: $300,000
• Loss: $100,000
• Deductible: $1,000

Calculation:

• Required coverage: $500,000 × 80% = $400,000
• Ratio: $300,000 ÷ $400,000 = 75%
• Payment: 75% × $100,000 = $75,000 - $1,000 = $74,000

The insured becomes a co-insurer for $25,000

Avoiding Coinsurance Penalties

• Carry adequate limits - At least 80% of replacement cost
• Agreed Value - Waives coinsurance if agreed amount maintained
• Value Reporting - Report values regularly for fluctuating inventory
• Inflation Guard - Automatic increases to coverage

Farm and Agricultural Property Insurance

Importance in North Dakota

North Dakota is one of the nation's leading agricultural states:

Farm Property Coverage Options

Farmowners Policy

The Farmowners policy combines:

• Dwelling coverage (like homeowners)
• Farm buildings coverage
• Farm personal property
• Farm liability
• Medical payments

Livestock Coverage

Crop Insurance

Federal Crop Insurance is administered separately:

• Managed by USDA Risk Management Agency
• Multiple Peril Crop Insurance (MPCI)
• Crop-Hail insurance available privately
• Not covered under standard farm policies

Equipment Coverage

Inland Marine Coverage

For mobile equipment and property in transit:

Equipment Breakdown

Equipment breakdown coverage (formerly boiler and machinery):

• HVAC systems
• Electrical panels
• Refrigeration equipment
• Computers and electronics
• Production machinery

Commercial Property Exclusions

Common Exclusions

Ordinance or Law Coverage

Building codes may require upgraded construction after major loss:

• Coverage A - Loss in value of undamaged portion
• Coverage B - Cost to demolish undamaged portion
• Coverage C - Increased cost of construction to code

Exam Tip: Know the difference between business income coverage (loss of profits) and extra expense coverage (costs to continue operations). Both protect against business interruption but in different ways.