ISO TIME ELEMENT COVERAGE FORMS OVERVIEW

(December 2025)

INTRODUCTION

Time element insurance covers losses that are time-sensitive and result from direct physical damage or loss to buildings and/or personal property. These damages are considered consequential or indirect because they arise only after the initial direct damage has occurred.

DIRECT DAMAGE VS. INDIRECT DAMAGE

Direct damage refers to physical loss or harm to tangible property. For example, when an apartment building burns down, the visible structural damage is readily apparent. In contrast, the loss of time-related factors is less obvious and harder to measure.

Rental income from the damaged apartment building ceases immediately upon direct damage. The total gross rental income loss is determined by multiplying the number of months required for repair or reconstruction by the monthly rental income. This loss is referred to as business income.

The apartment owner works with another owner to provide temporary housing for his tenants, aiming to reduce income loss and keep them as tenants. The extra cost for helping tenants is categorized as an extra expense.

Another issue to consider is that tenants in the damaged or destroyed building may lose valuable leases due to the damage. This results in a financial loss corresponding to the remaining value of their leases, known as leasehold interest.

INSURABLE RISK VERSUS BUSINESS RISK

Direct loss of or damage to tangible property is only one of many causes of indirect losses.

Examples:

A printing operation is completely shut down when its employees go on strike for two months.
A local restaurant specializing in offering Australian cuisine loses 80% of its business when its customers' tastes change, and they decide to eat elsewhere.
A tenant who has an appealing ten-year lease is forced to vacate after three years because the building owner chooses to sell the property. The new owner plans to renovate and update the building, but will not honor the existing leases. Consequently, the tenant has difficulty finding similar space at the same price and must rent a new location at a much higher cost.

Each of these scenarios illustrates a business risk insurance does not cover.

Each of these examples illustrates a business risk. They result from events that do not involve direct physical loss or damage to property. Standard insurance policies and coverage forms usually do not cover such indirect losses.

MATCHING COVERAGE TO THE RISK

It is challenging to determine the appropriate business income limit to carry, as losses are evaluated based on expected or anticipated lost income. The named insured's financial statement serves as a valuable and practical starting point for determining an appropriate limit for the selected coverage.

Current financial conditions, emergency plans, long-term business strategies, and specific business processes are just a few examples of other issues that must be addressed and evaluated before choosing the appropriate coverage form and limit.

Regardless of the coverage form selected, the Insurance Services Office (ISO) CP 15 15 Business Income Report/Worksheet should be used as part of the process to develop and determine the proper insurance limit. It provides detailed instructions and steps to follow for determining the appropriate limit for the selected coverage.

Related Article: CP 15 15–Business Income Report/Worksheet

POLICY MAKE-UP

Time Element coverage requires at least the following seven forms:

· IL 00 17–Common Policy Conditions

This mandatory form contains the common conditions that apply to all commercial insurance coverages. It must be used with all simplified monoline or multiline policies.

Related Article: IL 00 17–Common Policy Conditions Analysis

· CP DS 00–Commercial Property Coverage Part Declarations

· CP 00 90–Commercial Property Conditions

· One or more time element coverage forms:

CP 00 30–Business Income (and Extra Expense) Coverage Form
CP 00 32–Business Income (without Extra Expense) Coverage Form
CP 00 50–Extra Expense Coverage Form
CP 00 60–Leasehold Interest Coverage Form

Related Article: ISO Time Element Coverage Forms Analysis

· One or more of the Causes of Loss Forms:

CP 10 10–Causes of Loss–Basic Form
CP 10 20–Causes of Loss–Broad Form
CP 10 30–Causes of Loss–Special Form

· Policy Cover or Policy Jacket

TIME ELEMENT COVERAGE FORMS

ISO provides four primary time element coverage forms:

Related Article: Time Element Coverage Forms Analysis

CP 00 30–Business Income (and Extra Expense) Coverage Form

This is the most common coverage form. It pays the named insured for lost business income and extra expenses caused by direct physical damage or loss to property from a covered cause of loss. Extra expense coverage also reimburses the insured for additional costs to keep operations running.

Example: Tony’s Comic Book Shop burns down, resulting in a significant loss of income from walk-in customers. To maintain his customer base during the rebuild, he rents a temporary space. The additional rent costs and reduced income loss are covered.

CP 00 32–Business Income (without Extra Expense) Coverage Form

This coverage form provides similar business income protection as CP 00 30, but it only covers additional expenses that help minimize business income loss. It is ideal for operations that do not anticipate unexpected or extraordinary additional costs.

Example: A janitorial service is a type of business that may not require extra expense coverage.

CP 00 50–Extra Expense Coverage Form

This coverage form only insures the extra expenses incurred by the named insured. It is ideal for businesses that must keep running regardless of circumstances, such as hospitals, newspapers, insurance agencies, and public communication firms. These organizations are expected to operate continuously, regardless of cost, and will incur any necessary additional expenses to do so.

Example: A fire seriously damages the building that Damond Insurance Agency occupies. Joe Damond maintains an online server that stores copies of all his clients’ files, ensuring he does not lose any income despite the loss at his insurance office.

However, he must also rent temporary office space at another location, as well as necessary equipment such as furniture, computers, and phones, to continue serving his customers. This coverage form provides for the additional costs of notifying his clients and carriers of the temporary location. It also responds to other expenses he incurs to continue operations at the new location.

CP 00 60–Leasehold Interest Coverage Form

Tenants with attractive long-term leases offering payments below the current market value can use this coverage form. It covers the financial benefits within the lease for the remaining duration. It only responds to a covered loss if the lease is canceled due to a covered direct physical loss or damage to covered tangible property.

CAUSES OF LOSS FORMS

The Causes of Loss Forms describe the types of losses insured, exclusions, and relevant limitations that apply. The policy is not complete unless at least one of the following causes of loss coverage forms is included.

CP 10 10–Causes of Loss–Basic Form

This cause of loss form covers damage caused by:

· Fire

· Lightning

· Explosion

o This includes gas or fuel explosions in fired vessel furnaces, flues, or passages. However, it does not include rupture, bursting, or pressure-relief device operation, nor ruptures caused by water expansion or swelling.

· Windstorm or Hail – but this does not include:

o Frost

o Cold weather

o Ice, snow, or sleet, wind-driven or not, and excluding hail

o Loss or damage to a building's interior or its contents caused by rain, snow, sand, or dust—whether wind-driven or not. However, if wind or hail damages the roof or walls first, allowing elements to enter, there is coverage.

o Hail damage affecting lawns, trees, shrubs, or plants on a vegetated roof.

· Smoke – must be sudden and accidental.

o However, smoke from agricultural sludging or industrial operations is not included.

· Aircraft or Vehicles

o This applies if there's physical contact with the insured property by an aircraft, spacecraft, self-propelled missile, vehicle, or object thrown by a vehicle. It also covers damage from falling objects. Loss from vehicles owned or operated by the insured in the course of their business is not included.

· Riot or Civil Unrest

o This includes striking employees while occupying the insured premises and looting during the same incident.

· Vandalism

o This refers to deliberate and malicious damage or destruction of the insured property, excluding theft. However, the damage caused by burglars breaking in or out is covered.

· Sprinkler leakage

o Leaking or discharge of any substance from an Automatic Sprinkler System. This includes the tank collapsing when it is part of the system.

o If insured property houses the sprinkler system, the following are also covered:

§ Repair or replacement of the damaged parts of the sprinkler system

§ Tear out and replace any part of the insured property to repair the damaged sprinkler.

· Sinkhole collapse

o This is sudden sinking or collapse of land into an empty space underground created by water on limestone or dolomite. However, it does not include the cost to fill the sinkhole or to address sinking or collapse caused by man-made underground cavities.

· Volcanic activity

o This includes a volcanic eruption caused by airborne blasts, shock waves, ash, dust, particulate matter, or lava flows. All eruptions occurring within 168 hours are treated as a single event. However, removal of ash, dust, or particulate matter that does not cause direct physical damage to the insured property is not covered.

CP 10 20–Causes of Loss–Broad Form

This cause of loss form includes all the basic causes of loss above, plus the following:

· Falling objects

o This does not include personal property in the open or loss or damage to a building's interior or its contents unless the damage to the roof or walls is first breached by the falling.

· Weight of snow, ice, or sleet

o This does not include personal property located outside or lawns, trees, shrubs, or plants that are part of a vegetated roof.

· Water damage

o This is very restrictive and only includes plumbing, heating, air conditioning, or other systems or appliances located on the insured premise that contains water or steam.

o The cost to tear out and replace any part of the insured building or structure to repair the damage is included. However, the cost to repair the defect is not covered.

CP 10 30–Causes of Loss–Special Form

This cause of loss form covers direct physical damage or loss to insured property resulting from losses that are not specifically excluded or limited. Basically, if the cause of loss, or peril, is not excluded or limited, it is included.

NOTE: This form may also be referred to as Open Peril or All Risk. However, many companies and rating agencies no longer use the term "All Risk" because it can be used against them in court. If the court takes the term "All Risk" literally, the company could be in a heap of trouble.

AVAILABLE ENDORSEMENTS

Various endorsements can be added to customize Coverage Forms. Some are mandatory for specific classifications and business types, while others are optional, allowing customization of a standard form to meet particular coverage needs. Endorsements can expand, limit, remove, change, or add coverage to existing policies.

UNDERWRITING

Underwriting time element coverage typically begins with an evaluation of the direct damage aspects of Construction, Occupancy, Protection, and Exposure (COPE), as well as key intangible factors such as moral and morale risks. After this initial assessment, the focus shifts to underwriting specific to the time element. Determining the necessary coverage form(s), factors that might extend the restoration period, and the appropriate insurance limit requires thorough analysis.

RATING

The time element rating begins with the direct damage property rating, but is then adjusted by coverage specific factors. The process is very precise, although some details can be quite confusing.

Related Article: Time Element Coverage Rating Considerations