9.2 Building and Personal Property Coverage Form (BPP)

The Core Commercial Property Form

The Building and Personal Property Coverage Form, ISO form CP 00 10, is the workhorse of commercial property insurance. It is a named-coverage form: it tells you WHAT is insured (the property), while the attached Causes of Loss Form tells you which perils are covered. The two always work together — a BPP without a causes-of-loss form provides no coverage.

The BPP insures three categories of property, each with its own limit shown in the declarations:

• Building — the structure, completed additions, permanently installed fixtures, machinery and equipment, and outdoor fixtures.
• Your Business Personal Property (BPP/contents) — furniture, stock, machinery, and the insured's interest in tenant improvements while located in or within 100 feet of the described premises.
• Personal Property of Others — property of customers or others in the insured's care, custody, or control.

Valuation: ACV vs. Replacement Cost

The BPP's default valuation is Actual Cash Value (ACV) — replacement cost minus depreciation. Buying the Replacement Cost optional coverage (elected in the declarations) removes the depreciation deduction.

Worked ACV example: A 10-year-old roof system would cost $40,000 to replace new; its useful life is 20 years, so it is 50% depreciated. ACV = $40,000 − $20,000 = $20,000. On a replacement-cost basis, the insured collects the full $40,000 (subject to the limit and coinsurance), but only after actually repairing or replacing the property — until then the insurer pays ACV.

Trap: Replacement cost does NOT apply to stock unless 'Including Stock' is selected, and it never applies to property of others valued by written agreement, manuscripts, or works of art on the standard form.

Covered Property and Property Not Covered

The BPP lists categories that are specifically not covered unless added back by endorsement. Memorize the common exclusions from covered property:

• Currency, money, accounts, deeds, and securities (covered instead under crime forms)
• Land, water, growing crops, and standing timber
• Vehicles licensed for road use, and aircraft or watercraft
• The cost to excavate or fill land
• Bridges, roadways, walks, and patios when limits are not extended
• Property covered more specifically under another form

Tenant improvements and betterments are an important inclusion: a tenant who pays to install fixtures has an insurable interest in those improvements and insures them as Your Business Personal Property, even though they legally become part of the landlord's building.

Deductibles and How They Interact with Coinsurance

The BPP carries a flat per-occurrence deductible (commonly $500 or $1,000) that is subtracted after the coinsurance calculation, never before. Sequence matters on the exam: first apply the Did/Should coinsurance fraction to the loss, then subtract the deductible, then cap at the limit.

Reworking a clean example: a $1,000,000 building, 90% coinsurance (required limit $900,000), insured carries $900,000, suffers a $300,000 loss with a $2,500 deductible. Because the insured meets the coinsurance requirement, Did/Should = 1.0, payment = $300,000 − $2,500 = $297,500. Meeting or exceeding the required limit removes any penalty — the coinsurance clause only bites when the carried limit falls short of the required amount.

One more trap: the coinsurance test uses value at the time of loss, not the value when the policy was written. Inflation in construction costs can quietly push a building's value above the carried limit, creating an unintended penalty — which is exactly why Inflation Guard and Agreed Value options exist.

Coinsurance — The Most-Tested BPP Calculation

The BPP carries a coinsurance clause (commonly 80%, 90%, or 100%) requiring the insured to carry a limit at least equal to that percentage of the property's value at the time of loss. If they underinsure, the loss payment is reduced by a penalty.

Formula: Payment = (Limit Carried ÷ Limit Required) × Loss − Deductible

Worked example: A building is worth $1,000,000 with an 80% coinsurance clause, so the required limit is $800,000. The insured carries only $600,000. A $200,000 fire loss occurs with a $1,000 deductible.

• Did/Should = $600,000 ÷ $800,000 = 0.75
• 0.75 × $200,000 = $150,000
• − $1,000 deductible = $149,000 paid

The insured absorbs the $50,000 coinsurance penalty plus the deductible for being underinsured.

Additional and Extended Coverages

The BPP grants several coverages that add limits beyond the scheduled property:

The Coinsurance condition does not apply to these additional coverages — they are separate, stated-limit grants. Many of them require the insured to report and pay premium for the newly acquired property within the 30-day window to keep the coverage.

Coverage Extensions and the Seasonal-Increase Provision

The BPP includes coverage extensions (additional amounts that do not erode the limit if coinsurance of at least 80% is met): newly acquired or constructed property (e.g., up to $250,000 buildings / $100,000 business personal property at new locations for 30 days), personal property off premises, outdoor property (small sublimits on fences, signs, trees/shrubs/plants), and valuable papers/records cost of research. The seasonal automatic increase raises business personal property limits (commonly 25%) for inventory build-ups.

The exam tests recognizing these extensions as supplemental amounts contingent on adequate coinsurance, not part of the stated limit.