Understanding Your Property-Casualty Insurance Policy

April 20, 2016

Insurance doesn’t have to be complicated and confusing. Learning a few terms can help you develop a better grasp of what characterizes a typical ministry’s insurance policy.

What is CMP Insurance?

CMP stands for “Commercial Multiple Peril.” A CMP policy packages two or more insurance coverages together to protect an organization from various property and liability exposures.

Key Terms

Regardless of which CMP option a ministry selects, every insurance policy contains several important components:

  • Declarations pages outline the specifics of an insurance policy, including the name of the insurance company, name of the insured party, period that the policy covers, and the policy coverage limits.
  • Insurance coverage forms contain details of the coverage granted.
  • Definitions explain key terms used throughout the policy.
  • Conditions establish contractual “ground rules” and describe your responsibilities and obligations and those of the insurance company.
  • Limitations establish the boundaries of coverage and help remove ambiguity regarding the breadth or scope of coverage.
  • Exclusions describe the types of losses that a particular coverage form does not cover.

Familiarize yourself with these other insurance terms

  • Property insurance limit or liability limit is the highest amount an insurance company will pay if a covered claim occurs.
  • Peril is a cause of loss.
  • Property insurance peril option is the specific set of perils covered by a property insurance policy. Typically, insurers offer three peril options (check with your insurance agent for details):
  • Basic perils
  • Broad perils
  • Special perils
  • Loss valuation is a method that insurers use to assess the value of insured property and how much the company pays for a covered loss: actual cash value, replacement cost, or broadened valuation.
  • Deductible is the portion of a covered loss that you must pay before the insurer pays.
  • Premium is the price an insured pays for coverage.
  • Negligence is the failure to use a degree of care considered reasonable under a specific set of circumstances. Some ministries feel a “moral duty” to pay for any injury or damages occurring on their property or during their activities, which liability insurance policies do not cover. They cover only “legal duty.”