What is ‘Property Insurance’
Property insurance is a policy that provides financial reimbursement to the owner or renter of a structure and its contents in the event of damage or theft. Property insurance can include homeowners insurance, renters insurance, flood insurance and earthquake insurance. Personal property is generally covered by a homeowners or renters policy, unless it is of particularly high value, in which case it can usually be covered by purchasing an addition to the policy called a «rider.» If there’s a claim, the property insurance policy will either reimburse the policyholder for the actual value of the damage or the replacement cost to remedy the damage.
WATER EXCLUSION CLAUSE
BREAKING DOWN ‘Property Insurance’
Perils typically covered by property insurance include damage caused by fire, smoke, wind, hail, weight of ice and snow, lightning, theft and more. Property insurance also provides liability coverage in case someone other than the property owner or renter is injured while on the property and decides to sue.
Property insurance policies normally do not cover water damage caused by floods, tsunamis, drain backups, sewer backups, groundwater seepage, standing water and many other water sources. They also may not cover mold, earthquakes, nuclear events or acts of war, such as terrorism and insurrections.
There are three types of property insurance coverage: replacement cost, actual cash value, and extended replacement costs. Replacement cost coverage pays the cost of repairing or replacing your property with like kind & quality. Coverage is based on replacement cost values, not actual cash value of items. Actual cash value coverage provides for replacement cost minus depreciation. Extended replacement cost will pay over the coverage limit if the costs for construction have increased. This usually won’t exceed 25 percent of the limit. When you obtain an insurance policy, the limit is the maximum amount of benefit the insurance company will pay for a given situation or occurrence.
Classifications of Homeowners Property Insurance
Most homeowners purchase an HO3 policy, a hybrid policy which covers personal property for physical loss or damage caused by 16 perils, such as fire, vandalism and theft, with certain conditions and exclusions. Under an HO3, there are coverage limits on some valuables and collectibles, such as sterling silver, gold, jewelry, fur, money, coins, firearms and stamps, which means if you lose or damage any of these items, coverage would have a predetermined limit. No coverage is usually provided in an HO3 for accidental breakage/damage and mysterious disappearance (lost, misplaced) of valuables, including fine art and antiques.
HO5 homeowners coverage includes everything in an HO3 policy, but it’s applied to the structure and the property within your home, including your furniture, clothes and appliances. However, an HO5 does not include coverage for earthquakes or floods. HO5 insurance policies are available to homes that were either built in the last 30 years or renovated in the last 40 years, and they typically cover any damages at replacement cost.
HO4 property insurance is commonly known as renters insurance. It covers tenants from loss of personal property and liability coverage. It does not cover the actual house or apartment being rented, which should be covered by the landlord’s insurance policy.
All Risk Property Insurance
Property insurance is based on classical insurance principles, while offering a vast array of approaches. Today, insurers design numerous programs pooling different risks; however, the front line is always given to fire and explosion risks. The standard policy covers the most common types of risks, whereas all-risk extended coverage provides protection against any events, except for those specifically excluded from coverage. As all-risk extended coverage offers protection against risks that are beyond the basic coverage.
Having this coverage, the client is insured against any type of events, except for exclusions specified in the policy. The list of exclusions is governed by the insurance rules and the policy. In some situations the list can be downsized or extended, depending on the type of the property, the needs and the budget of the insured.
Coverage is never provided for losses resulting from
War and hostilities, civil wars or their consequences, civil commotion, strikes, lockouts, seizures, requisition, capture, property destruction or damage caused by the order of military or civil authorities, acts of terrorism
Any nuclear damage
Guilty intent or gross negligence of the Insured, beneficiary or their agents
Spontaneous combustion, fermentation, putrefaction or any other natural properties of insured items
Total or partial collapse of structures, if the collapse was not caused by the insured event
One of the most important tasks in All-Risk Property Insurance is proper estimation of the amount of coverage based on the replacement cost or book value. Replacement cost (insurance based on the «new for old» principle, i.e. the cost of the new comparable property) is a better solution in the event of loss. Book value (the value that factors in depreciation) is a better choice for new properties. In all other cases, book-value based insurance is associated with additional expenses as depreciation is covered by the owner.
Competent estimation of the amount of an unconditional deductible is of paramount importance in insurance.
When seeking insurance for a large-size property, the prospect client should always remember about importance of pre-insurance inspection (survey) performed by a competent risk engineer, without seeing it as a ploy invented by insurers in order to find out all the bottlenecks and increase insurance prices. The survey is essential for proper assessment of the risk level and for the further decision on optimum terms and conditions of insurance as well as on recommendations that will help the insured to minimize his/her exposure to loss.
Advantages of insurance with AIG
A world leader in insurance, with 90 years of proven experience and customer service
The best insurance company in claims settlement, the rating of 2009 (Euromoney magazine rating)
2011: AIG, CJSC, was awarded the nationally recognized title «Insurance Company No. 1 on the Real Estate Market», Russia
An experienced team of competent risk engineers
Large and stable capacities with high levels of protection
Scrupulous screening and selection of risks; a powerful support from the team of underwriters (experts in risk selection and analysis)
When it comes to insurance for your physical property, you want to make sure to get a policy written on an all-risk basis rather than on a named-peril basis. While the latter only covers the specific perils named in the policy, an all-risk policy will cover you for virtually anything (except for a few specific enumerated exclusions). The all-risk policy will allow you to:
Eliminate duplication and overlap;
Avoid gaps in trying to cover your liabilities through a number of specialized policies;
Encourage quicker settlements by working with one agent and one attorney;
Reduce the expense of having many different policies.
If your local or regional location is inclined toward a specific calamity, you may consider additional insurance or pay an additional premium to insure against fire, flood, earthquake, nuclear risks (if you’re near a nuclear plant), hail, windstorm, vandalism, or crime.
An experienced agent or broker may roll many overages into a business owner’s policy (BOP)—a ready-made program for small businesses—or a special multiple-peril plan.
Replacement cost insurance will replace your property at current prices, regardless of what you paid for it, and thus protect you against inflation. However, there’s usually a provision that your total replacements can’t exceed the policy cap. For example, if you have a 40,000-square-foot facility that would cost $40 per square foot to replace, the total replacement cost ($1.6 million) may exceed your $1 million policy limit. To protect yourself, buy replacement insurance with an insurance guard, which adjusts the cap on the policy to allow for inflation. If this isn’t possible, simply review your policy limits from time to time to make sure you have adequate coverage.
With coinsurance, the owners of a building can actually share the potential loss with the insurance company if they’re willing to share the premium cost. These terms are crucial if you are on either end of a leasing agreement. A common percentage of market value of buildings used in coinsurance is 80 percent, with the owner bearing the cost of the other 20 percent in the event of a complete loss.