Commercial property forms follow the same tiered logic as habitational but with a wider menu and commercial-specific provisions.
- Tiered perils, named perils, broad form, and all-risk (open-perils). All-risk shifts the burden of proof on cause of loss to the insurer, who must point to an exclusion to deny.
- Scheduled property, most commercial property is scheduled location-by-location with a value for building, contents / business personal property, and stock. Each schedule item has its own limit.
- Stock valuation, the basis of valuation on stock matters
greatly:
- Selling price, pays the price at which the insured would have sold the destroyed stock, including markup. Used on finished goods to preserve the insured's expected gross margin.
- Replacement cost, pays the cost to replace raw or in-process stock.
- Actual cash value, pays cost less depreciation; rarely appropriate for inventory.
- Co-insurance on commercial property, the same percentage requirement seen on habitational forms (commonly 80% or 90%, but 100% on RC-valued schedules). Penalty applies on partial losses.
Commercial property also has standard add-ons: equipment breakdown (boiler and machinery) for mechanical/electrical failures; course of construction (builder's risk) for buildings under construction; ordinance or law for code-upgrade costs on a covered loss.
Common mistake: under-valuing stock by listing inventory at cost when the policy values it at selling price (or vice versa). The valuation method must match the schedule. Mismatches are routine coinsurance penalties on commercial accounts.
⚠️ Trap: Equipment breakdown is excluded from the standard commercial all-risk property form (mechanical breakdown is a standard exclusion). It is its own coverage line. A covered fire following a boiler explosion is covered by property; the explosion itself is equipment breakdown.
Recall: Why does selling-price valuation on stock matter to the insured? What does the equipment-breakdown coverage cover that all-risk property does not?