09.06. Factors Affecting Commercial Property Premium

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Author:
COC2
ID:
214485
Filename:
09.06. Factors Affecting Commercial Property Premium
Updated:
2013-04-19 10:08:54
Tags:
Factors Affecting Commercial Property Premium
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Factors Affecting Commercial Property Premium
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  1. Limit of Insurance Rating
    • most commercial property losses are partial, and do not increase proportionally with the amount of insured property
    • rates decrease as insured value increases
  2. Cause of Loss vs Rates
    basic and broad form: consists of Group I rates (fire, explosion, lightning, vandalism, sprinkler leakage) and Group II rates (all other causes). Additional rate is added to both groups for broad form
  3. Coinsurance percentage
    • rates are based on the assumption that they will be used with an 80% coinsurance clause
    • rate is reduced for higher amounts of coinsurance to (1) recognize the reduced likelihood of a total loss and (2) encourage purchase of higher limits
  4. Deductible amount
    rates are derived based on assumption of a $500 deductible
  5. Other factors affecting the premium
    • Construction
    • Occupancy
    • Protection (1=best external, 10 = worse)
    • External exposure
    • Location

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