At Honeycomb Insurance, our mission is to take the mystery out of real estate insurance. As we like to say, more clarity, less worry. But we know that commercial property insurance can be incredibly complex, even for the seasoned professional. That’s why we decided to come up with this Ultimate Commercial Property Insurance Dictionary.
Commercial property insurance might seem complicated, but we’re here to help make sure that you as the buyer understand every inch of it. This Ultimate Commercial Property Insurance Dictionary is here to demystify key concepts and terms, and to help you become the commercial residential insurance pro you’re destined to be.
Types Of Coverage and Insurance Policies
Apartment Building Insurance
Commercial property insurance purchased by the owner of an apartment building which protects the building itself and its common areas. Apartment building insurance typically covers the walls, structures, and communal spaces.
Homeowners Association Insurance / Condominium Association Insurance
Insurance that protects spaces and property in a community that’s under the jurisdiction of a Homeowners Association or Condo Association, in many cases this type of coverage covers the building structure itself (e.g. for fire damage, wind and hail damage, accidental water damage etc.). It’s also known as HOA insurance, and it’s one of our specialties here at Honeycomb. HOA and Condo Association insurance keeps you and your condo owners safe, by protecting public spaces and handling liability issues in these spaces.
Directors And Officers Coverage
A separate form of liability insurance from HOA/Condo Association insurance that would come into play in the event of a lawsuit for negligence or malfeasance. For example, this might cover the Condo Association itself, or individual board members. If your HOA doesn’t have D&O insurance, you might want to consider getting it. Even if a lawsuit is dismissed, the HOA must pay to respond to the lawsuit and defend itself.
Master Insurance Policy
This is the name for the policy an HOA or Condo Association purchases that protects the communal spaces and property. Those spaces might include roofs, common walls, stairways, lobbies, atriums, pools, and clubhouses. A Master Insurance Policy likely does not cover personal items inside the apartment units. There are a few different types of HOA / Condo Association Master Policies:
Bare Walls Insurance
A Master Policy that typically mainly protects the “bare walls,” or only the structure of a building. This is typically applicable only up to the drywall. It does not cover other elements of the building such as fixtures or furnishings, and typically doesn’t even cover paint on the walls themselves.
Single Entity Insurance
A Master Policy that protects almost all of the property, including fixtures in common areas, and original features of the condos such as appliances. It does not apply to improvements made on units (such as upgrades), and does not cover the resident’s belongings, such as clothing.
Typically the most inclusive insurance option when it comes to HOA insurance, it covers everything Single Entity insurance covers, as well as improvements and upgrades made to units.
Insurance for a multifamily building, or a building with more than one unit in one structure. Multifamily homes differ from condos in the sense that multifamily homes typically have one owner. The terms “multifamily” and “apartment” are sometimes used interchangeably, but they are actually distinct terms. Multifamily typically refers to a building with four or fewer units, while an apartment building is five or more.
Another term for insurance for building owners who rent space to others, including single-family, multi-family, and retail buildings. If you have a loan on the property, your lender likely requires you to have Landlord Insurance.
Actual Cash Value
In the event of a claim, an insurance company might use Actual Cash Value to determine how much to pay to the policyholder. This figure is calculated as the actual value at which the property could be sold today, or the cost of the item, minus depreciation. The other options for determining claim payout are “Replacement Cost,” “Guaranteed Replacement Cost,” and “Agreed Amount.”
When an insurance company and insurer agree upon the monetary value of something covered in the policy.
This figure is calculated as the cost to replace the item today, or buying a similar object brand new.
Guaranteed Replacement Cost
This type of claim payout will pay for the full price to replace or rebuild the insured item, even if it’s become more expensive.
A temporary insurance contract that serves as a policy until a full policy is issued.
The intermediary who negotiates the sale of insurance. They act as an agent who represents the buyer, and can access multiple carriers on their behalf, in order to facilitate the insurance transaction.
The formal request by someone who holds an insurance policy for the insurance company to compensate them. Insurance claims are based on the terms of individual policies, and once a claim is made, the insurance company will review it, to see if the claim is covered under the policy.
The amount of money a policyholder has to pay, before an insurance provider pays out a claim. It’s the amount a policyholder is responsible for paying towards the loss.
A modification to an existing insurance policy. It might mean adding additional coverage, or changing existing coverage. An endorsement is also sometimes called a “rider.”
Inflation Guard Provision
Over time, costs rise, and sometimes this can lead to the cost of your insurance going up. An Inflation Guard Provision defines the amount by which the limit of insurance is raised within a specific period of time. This helps insurers stay ahead of rising construction and labor costs, and keeps the property from being underprotected.
There are typically two main types of Insurance Discounts: policy related discounts, and property related discounts. Policy related discounts might include Multi-line Discounts, Paid in Full Discounts, or Automatic Recurring Payment Discounts. Property related discounts vary, but can be given on the basis of assessing the condition of the building. Also in general, sprinkler systems and central fire alarm systems typically apply for hefty discounts.
Coverage that protects spaces from damage by vandals. It is usually recommended that certain buildings have this type of coverage, such as churches or schools, because they are unoccupied for long periods of time and can become targets.
An event that damages the insured property. Some common perils can include fire, flood, or a break-in. Real estate insurance comes in two main forms: Named Peril, and All Peril.
Named Peril: A policy that only covers specific perils that are listed (or “named). This might be offered by insurance companies at a lower cost, but it’s because the policy will only cover the listed perils, such as fire or vandalism. Named Peril coverage won’t cover you for other important damages that could happen.
All-Peril: All risk insurance, which is the broadest coverage available in the US. This will cover all losses, unless they’re specifically excluded. Here at Honeycomb, every insurance policy we issue is an “all peril” special form insurance policy.
The amount of money the policyholder pays for an insurance policy.
Pro Tips To Look Out For
Here at Honeycomb insurance, we’re dedicated to bringing simplicity and transparency to the real estate insurance space for condo associations, building owners, property managers, and developers everywhere. But we know just how complicated these topics can be. Here are some pro tips to keep in mind, and mistakes to watch out for:
Only having “Named Peril” coverage: Buying insurance comes with a litany of options, including Named Peril versus All Peril coverage. Named Peril might be cheaper up front, but can cost you in the long run. That’s why here at Honeycomb, all of our policies are All Peril policies.
Using “non-admitted” insurance companies: Some insurance companies offer “non-admitted” coverage, meaning they’re not approved to sell insurance by the department of insurance in that state. If you buy “non-admitted” insurance and the insurer goes bankrupt, you won’t have the protection of your state. (Guess what? The insurance we sell at Honeycomb is fully admitted in any state we operate in, so you have the fullest protection)
Actual Cash Value versus Replacement Cost: In the event of a claim, how will you be reimbursed? With Actual Cash Value, you might not be paid enough to replace the item today. Check what your policy says, and make sure you have sufficient coverage.
Not maximizing your discounts: Insurance plans are designed with certain discounts in place, so make sure your policies are organized in a way that maximizes your discounts. Here at Honeycomb, we offer many additional discounts that you won’t find elsewhere, especially ones related to how your property is managed and maintained.
Having a generic insurance plan: Most insurance providers sell generic policies which might not be the best fit for everyone. That’s why we here at Honeycomb offer unparalleled bespoke coverage, which gives customers and brokers an almost endless ability to customize every part of the insurance policy in real time.
Enhanced Ordinance and Law Coverage: This covers the increased costs of reconstruction, in the event that a local law or ordinance has changed requiring more expensive materials, or additional elements that weren’t in the original building. This element is critical to ensuring you don’t get hit with surprise expenses when you file a claim (and yep, you guessed it, Honeycomb offers this, and it’s competitively priced via our 360 Property Coverage Enhancement)
Honeycomb Is Here To Help
Commercial property insurance is a bit complex, but it’s absolutely crucial. That’s why Honeycomb is here, to ensure that you have the custom coverage that you need, with the individual attention you deserve. Not only are we here to help you navigate the buying process, but we’re also here to help you save money, by offering the same or better coverage for up to 40% less. With claims made simple, online everything, and expert insight advice, Honeycomb is proud to be redefining real estate insurance, to ensure that you have best-in-class insurance coverage.