2.3 Indiana Commercial Property Insurance

How a Commercial Property Policy Is Built

Indiana commercial property coverage is assembled from standard ISO Commercial Property forms. The core is the Building and Personal Property Coverage Form (CP 00 10), to which the producer attaches a Causes of Loss form that decides which perils apply. Together they sit inside a larger package (a Commercial Package Policy or a Businessowners Policy, BOP, for smaller risks).

What the CP 00 10 Insures

The insured chooses a separate limit for the building and for business personal property, and each is subject to its own coinsurance clause and deductible.

Valuation and Additional Coverages on the CP 00 10

By default the CP 00 10 settles building and personal property losses at actual cash value; selecting the Replacement Cost optional coverage on the declarations upgrades that to replacement cost. The form also bundles modest Additional Coverages — debris removal, preservation of property, fire department service charge, pollutant cleanup (capped, often around $10,000), and electronic-data restoration — plus Coverage Extensions such as newly acquired property, personal effects, and outdoor property.

A common BOP alternative packages property and general liability for smaller Indiana shops and includes some business income automatically.

Causes of Loss Forms

The attached Causes of Loss form is the most common commercial-property exam topic. Memorize the ladder from narrowest to broadest:

Special Form is the broadest and most frequently tested as the "all-risk" answer; it still excludes flood, earth movement, war, wear and tear, and similar items, which can be added back by endorsement.

Business Income and Extra Expense

Business Income (and Extra Expense) Coverage (CP 00 30) responds when a covered cause of loss suspends operations. It pays during the period of restoration — the time it should reasonably take to repair, rebuild, or replace the damaged property.

• Lost net income the business would have earned
• Continuing normal operating expenses, including payroll and rent
• Extra Expense — added costs to resume or continue operating (renting a temporary site, expedited shipping)
• Extended period of indemnity (optional) continues coverage after repairs while sales recover

A waiting-period deductible (often 72 hours) typically applies before Business Income begins. A related coverage, Civil Authority, pays lost income (usually for a limited number of weeks) when a government order bars access to the insured's premises because of covered damage to nearby property — relevant after an Indiana tornado closes a city block even if the insured's own building is intact.

Coinsurance Math

Commercial property forms include a coinsurance clause (commonly 80%, 90%, or 100%) that requires the insured to carry a limit at least equal to that percentage of the property's value. Fall short and the claim is reduced:

Payment = (Limit Carried ÷ Limit Required) × Loss − Deductible, where Limit Required = Property Value × Coinsurance %

Worked example. A building is worth $1,000,000 with an 80% coinsurance clause, so the limit required is $800,000. The owner carries only $600,000 and has a $100,000 loss with a $1,000 deductible:

• ($600,000 ÷ $800,000) × $100,000 = 0.75 × $100,000 = $75,000
• Less $1,000 deductible = $74,000 paid; the insured eats roughly $25,000 as a co-insurer.

If the owner had carried the full $800,000, the same $100,000 loss would pay $100,000 minus the deductible. The penalty applies only to partial losses; a total loss still pays up to the policy limit.

Indiana Exposures and Add-On Coverages

Indiana businesses face frequent tornado, straight-line wind, hail, and winter ice losses, plus aging building stock subject to updated building codes. Recommend layering:

• Equipment Breakdown (boiler & machinery) for HVAC, electrical, and production equipment failures
• Ordinance or Law to cover demolition and code-upgrade costs after a loss
• Cyber liability / data breach for businesses holding customer data
• Flood — a separate NFIP or private policy, since the property form excludes it

Common Exam Traps

• Coinsurance affects partial losses, not total losses.
• Special Form is open perils — it covers anything not excluded, the opposite of Basic/Broad.
• Business Income pays during the period of restoration, measured by repair time, not by an arbitrary calendar limit.
• The limit required uses the coinsurance % times value, not the loss amount.

Exam Tip: On any coinsurance problem, compute the required limit first (value × coinsurance %), then form the fraction carried ÷ required before multiplying by the loss and subtracting the deductible.