50 key terms every apartment owner should understand about their insurance program.
Actual cash value is the replacement cost of a property or item minus depreciation, reflecting its current worth at the time of loss rather than the cost to replace it new.
An additional insured is a person or entity added to a liability insurance policy who receives coverage for claims arising from the named insured's operations or premises.
An admitted carrier is an insurance company licensed and regulated by the state department of insurance, with policies backed by the state guaranty fund in case of carrier insolvency.
The aggregate limit is the maximum total amount an insurance policy will pay for all covered claims during the entire policy period, typically one year.
An agreed amount endorsement waives the co-insurance penalty by establishing a property value mutually agreed upon by the owner and insurer for the policy period.
An anti-concurrent causation clause excludes coverage for losses involving an excluded peril even when a covered peril occurs simultaneously or in sequence and contributes to the same damage.
Assault and battery coverage provides liability protection for claims arising from violent incidents on the property, which are often excluded or sublimited in standard general liability policies.
Betterments and improvements are permanent upgrades made to a building by a tenant or owner that increase the property's value or utility beyond its original condition.
A blanket policy provides a single coverage limit that applies across multiple buildings or locations, rather than assigning a separate limit to each individual structure.
Builders risk insurance covers a building under construction or renovation against property damage from covered perils until the project is completed and a permanent policy takes over.
Building ordinance compliance cost is the additional expense required to bring a damaged building into conformity with current building codes and zoning laws during repair or reconstruction.
Business income coverage replaces income lost and pays continuing expenses when a business cannot operate due to a covered property loss, similar to loss of rents for apartment properties.
Business personal property is movable property owned by the business and used in its operations, distinct from the building itself and covered under a separate policy limit.
A certificate of insurance is a standardized document issued by an insurer or its agent that summarizes the key terms, limits, and effective dates of an insurance policy for third-party verification.
A certificate of insurance is a standardized document that provides proof of coverage to third parties, summarizing the policy types, limits, and effective dates.
A claims-made policy provides coverage for claims that are first reported to the insurer during the active policy period, regardless of when the underlying incident occurred, subject to a retroactive date.
A co-insurance clause requires the property owner to insure the building for at least a specified percentage of its replacement cost, typically 80%, or face reduced claim payouts.
A commercial package policy bundles two or more commercial coverage lines—typically property and general liability—into a single policy with unified terms, a common declarations page, and often a premium discount.
Commercial umbrella insurance provides additional liability limits above the underlying general liability, auto liability, and employers liability policies, and may broaden coverage beyond the underlying terms.
Contingent liability is a potential legal obligation that may arise from the actions or negligence of a third party with whom the insured has a contractual or business relationship.
Debris removal coverage pays the cost of removing wreckage, rubble, and other debris from the insured property following a covered loss, separate from the cost of repairing or replacing the damaged structure.
A deductible buydown is an endorsement that reduces the standard deductible for a specific peril, such as wind/hail, in exchange for an additional premium.
DUS is Fannie Mae's multifamily lending program that delegates underwriting authority to approved lender partners who share risk on the loans they originate.
Earned premium is the portion of the total policy premium that corresponds to the coverage period that has already elapsed, representing the amount the insurer has earned by providing protection during that time.
The effective date is the specific date and time when an insurance policy's coverage begins, establishing the earliest moment from which covered losses are eligible for payment.
EPLI covers employers against claims by employees alleging wrongful termination, discrimination, harassment, retaliation, or other violations of employment law.
Equipment breakdown coverage pays for repair or replacement of mechanical and electrical equipment that fails due to internal causes, which standard property insurance does not cover.
The excess and surplus lines market consists of insurance carriers that are not admitted in a state but are authorized to write coverage that admitted carriers are unwilling to provide.
Excess flood insurance provides flood coverage above the limits of the NFIP policy, allowing apartment buildings to insure their full replacement cost against flood damage.
Excess liability insurance provides additional limits above an underlying policy, following the same terms and conditions of the underlying coverage without broadening protection.
The experience modification rate is a multiplier applied to workers compensation premiums that reflects the employer's historical loss experience compared to the industry average.
An extended reporting period is an optional provision that allows claims to be reported after a claims-made policy has expired or been cancelled, covering incidents that occurred during the original policy period.
Fair housing laws prohibit discrimination in housing based on protected characteristics such as race, color, religion, national origin, sex, familial status, and disability.
Fire legal liability coverage pays for damage to premises rented to or occupied by the insured when the damage is caused by fire, protecting the insured's legal obligation to the property owner.
A garden-style apartment is a low-rise residential building, typically two to three stories, situated in a campus-like setting with surface parking and outdoor access corridors.
Guaranteed replacement cost is a property valuation endorsement that obligates the insurer to pay the full cost of rebuilding a damaged structure even if that cost exceeds the policy's stated coverage limit.
Habitational insurance is a category of commercial insurance that covers residential rental properties including apartments, condominiums, and other multi-tenant dwelling structures.
A hard market is a phase of the insurance cycle characterized by reduced carrier capacity, rising premiums, restrictive coverage terms, higher deductibles, and stringent underwriting requirements.
A high-rise apartment building is ten or more stories tall, constructed with steel and concrete, and equipped with multiple elevators and advanced fire suppression and life safety systems.
A hold harmless agreement is a contractual provision in which one party agrees to assume liability for certain risks and not to hold the other party responsible for resulting losses or claims.
Impaired property is tangible property that cannot be used or is less useful because it incorporates or is used with a defective product or work, but which can be restored to use by repairing or replacing the defective component.
The indemnity period is the maximum length of time for which a business income or loss of rents policy will pay claims following a covered loss, typically twelve to twenty-four months.
A layered insurance program structures coverage in stacked tiers, with a primary policy covering losses up to a specified limit and one or more excess policies providing additional coverage above that threshold.
Loss control encompasses the risk management inspections, recommendations, and mitigation programs that insurers and property owners implement to reduce the frequency and severity of insurance claims.
Loss of rents coverage reimburses the apartment owner for rental income lost when units become uninhabitable due to a covered property damage event.
A loss payee is a party named on an insurance policy to receive claim payment proceeds, typically the mortgage lender whose financial interest in the property must be protected.
A loss payee is a person or entity, other than the named insured, that is entitled to receive all or part of the insurance claim proceeds, typically a lender with a financial interest in the insured property.
A loss run is a detailed claims history report provided by the insurer showing all claims filed against a policy over a specified period, typically five years.
LIHTC is a federal tax credit program that incentivizes private investment in affordable housing by providing tax credits to developers who build or rehabilitate qualifying apartment properties.
Market value is the price a willing buyer would pay a willing seller for a property in an open and competitive market, distinct from replacement cost value and not typically used for insurance purposes.
A master policy is a single insurance program that covers all properties in an owner's portfolio under one set of coverage terms, renewal dates, and administrative procedures.
A material misrepresentation is a false or misleading statement made on an insurance application that, if known, would have caused the insurer to decline coverage, charge a higher premium, or impose different terms.
A mid-rise apartment building is typically four to nine stories tall, featuring elevator access, enclosed interior corridors, and either structured or podium parking.
Mitigation is the duty of the insured to take reasonable steps to prevent further damage to the property after a covered loss has occurred, and more broadly, any action taken to reduce the severity or likelihood of future losses.
Moral hazard is the increased likelihood that an insured party will take greater risks or act less carefully because the financial consequences of a loss are borne by the insurer rather than the insured.
A mortgagee clause names the lender on the property insurance policy and provides the lender with certain protections, including the right to receive claim payments and notice of cancellation.
The named insured is the person or entity identified on the policy declarations page as the policyholder, with full rights and obligations under the insurance contract.
A named storm deductible is a separate, typically percentage-based deductible that applies to property damage caused by hurricanes and tropical storms designated by the National Weather Service.
The NFIP is a federal program administered by FEMA that provides flood insurance to property owners in participating communities, with coverage limits of $500,000 per commercial building.
Negligence is the failure to exercise the level of care that a reasonably prudent person or entity would exercise under similar circumstances, resulting in harm or damage to another party.
An occurrence is an accident or event, including continuous or repeated exposure to substantially the same harmful conditions, that results in bodily injury or property damage during the policy period.
Optigo is Freddie Mac's multifamily lending network of approved seller/servicers that originate and service apartment loans under Freddie Mac's guidelines.
Ordinance or law coverage pays the additional cost of complying with current building codes when repairing or rebuilding a property after a covered loss.
Per-door cost is a metric that divides the total insurance premium by the number of units in the property, used for budgeting and benchmarking apartment insurance expenses.
Per-door cost is the method of expressing insurance premiums and other operating expenses as a cost per individual apartment unit, enabling standardized comparison across properties of different sizes.
The per-occurrence limit is the maximum amount an insurance policy will pay for a single covered event or claim, regardless of how many claimants or damaged items are involved.
The pollution exclusion is a standard policy provision that eliminates coverage for bodily injury, property damage, or cleanup costs arising from the discharge, dispersal, release, or escape of pollutants.
A portfolio program is a coordinated insurance placement that covers multiple apartment properties under a unified structure, leveraging diversification to achieve better terms.
Premises liability is the legal responsibility of a property owner or occupier for injuries sustained by persons on the property due to unsafe or defective conditions.
A proof of loss is a formal sworn statement submitted by the insured to the insurance company after a covered loss, documenting the facts, circumstances, and amount of the claimed damage.
A protective safeguards endorsement requires the insured to maintain specified protective devices or services—such as fire sprinklers, alarms, or security systems—as a condition of coverage.
Rate adequacy refers to whether insurance premiums are sufficient to cover expected losses, expenses, and profit margins for a given class of business or individual risk.
A rate filing is a formal submission by an insurance company to the state insurance department requesting approval to use specific premium rates for a particular line of insurance.
Reinsurance is insurance purchased by an insurance company from another insurer to transfer a portion of its risk exposure, protecting the primary insurer from catastrophic losses that could threaten its financial stability.
A reinsurance treaty is a contract between an insurance carrier and a reinsurer that transfers a portion of the carrier's risk, affecting the carrier's capacity and pricing for apartment coverage.
A replacement cost estimator is a tool or service used to calculate the current cost of rebuilding a structure using materials of similar kind and quality, accounting for local labor rates, material costs, and construction methods.
Replacement cost value is the amount needed to repair or replace damaged property with materials of similar kind and quality at current prices, without deducting for depreciation.
A risk retention group is a member-owned liability insurance company formed under the federal Liability Risk Retention Act that provides coverage exclusively to its members, who share a common business or profession.
A schedule of values is a detailed listing of each insured property or building in a portfolio, showing the individual replacement cost, address, construction type, and coverage details for each location.
A scheduled policy assigns a specific coverage limit to each individual building or location, with claims at each site capped at that building's designated amount.
A soft market is a phase of the insurance cycle characterized by abundant carrier capacity, competitive pricing, broader coverage terms, and relaxed underwriting standards.
Special form, codified as ISO CP 10 30, is the broadest commercial property coverage form, covering all causes of loss unless specifically excluded in the policy.
Special form coverage protects against all causes of loss except those specifically excluded in the policy, providing broader protection than a named-peril policy.
A sublimit is a coverage cap within a policy that is lower than the overall policy limit, applying to a specific type of loss such as water damage, mold, or sewer backup.
The total insured value is the full amount of coverage on a property insurance policy, representing the maximum the insurer will pay in the event of a total loss.
Underwriting is the process by which an insurer evaluates the risk characteristics of a property or entity, determines whether to offer coverage, and establishes the terms, conditions, and premium for the policy.
A vacancy clause modifies or restricts insurance coverage when a building has been unoccupied beyond a specified period, typically 60 consecutive days.
A valued policy law is a state statute that requires the insurer to pay the full policy limit in the event of a total loss of the insured property, regardless of the property's actual value at the time of the loss.
A waiver of subrogation is a policy endorsement that prevents the insurer from seeking recovery from a specified third party after paying a claim, even if that party was at fault.
A wind/hail deductible is a separate deductible, often percentage-based, that applies to property damage caused by wind and hail events, distinct from the standard property deductible.