Catastrophic Casualty Insurance (property):
Financial loss caused by major physical damage.
- Occurrence causes permanent loss of rent payments from tenant.
- Occurrence has rendered the property unsuitable for continued business operation (subject to restrictive covenants in the lease).
- Policy limits are no more than the present value (PV) of outstanding debt.
- erm coincides with primary term of lease, typically 10-20 years.
Paid for by the borrower for benefit of the lender.
In case of loss triggered by catastrophic damage, all property insurance proceeds are available to offset the claim as well as the land and building (if any).