10 Basics of Property Insurance Part 2

Class 1 construction

Frame construction built of wood, most likely to catch fire.

Class 2 construction

Jointed masonry, constructed of concrete or brick.

Class 3 construction

Non combustible construction primarily made of metal.

Class 4 construction

Masonry non combustible, meaning the roof and floor do not contain wood.

Class 5 construction

Modified fire resistive class, rated at 2 hours or less.

Class 6 construction

Fire resistive class, rated at 2 hours or more.

Actual Cash Value (ACV)

Replacement cost minus depreciation based on today's costs.

Replacement Cost

Cost to replace an item without depreciation.

Functional Replacement Cost

Replaces damaged items with alternatives that serve the same function but are not identical.

Market Value

Price based on free market conditions, influenced by supply and demand.

Agreed Value

Value agreed upon by the insured and insurance company before the policy is issued.

Stated Value

Value used to determine premiums, not the amount the insured will receive.

Pair or Set Clause

Valuation of a loss based on a fair proportion of the total value of the set.

Appraisal

Process used to resolve disagreements on the amount of a loss.

Arbitration

Process used to resolve disagreements on areas other than the loss amount.

Coinsurance

Clause requiring property to be insured for a specified percentage of its value, commonly 80%.

Vacancy

No property or people present at the time of loss.

Unoccupancy

No people present at the time of loss, but property may still be there.

No Benefit to Bailee

Policy clause stating that no insurance coverage applies while property is in the temporary possession of a bailee.