What Is Property Insurance?
Property insurance is a broad term for a variety of insurance policies that offer either property protection or liability coverage for property owners. It provides financial compensation to the owner or lessee of the property and all other persons who are injured on the property, in the event of damage or theft. Types of property insurance include homeowners insurance, renters insurance, flood insurance, and earthquake insurance. Personal property is usually covered under a homeowners or renters policy, except for items that are of high value, which is usually done by adding a “rider” to the policy. When filing a claim, the policyholder receives either the actual value of the damage or the replacement cost of repairing the damage.
How Property Insurance Works
Property insurance provides coverage for a variety of perils, including fire, smoke, wind, hail, snow, ice, lightning, and more. It also protects against vandalism and theft, protecting both the structure and its contents. Additionally, property insurance offers liability coverage in the event that someone other than the property owner or tenant is injured on the premises and decides to file a lawsuit.
Property insurance typically does not provide coverage for damage caused by various events such as tsunamis, floods, sewer and drain backups, seeping groundwater, standing water, and other water sources. Mold damage and earthquake damage are also usually excluded from coverage. These policies also typically do not cover extreme scenarios such as nuclear events, acts of war or terrorism.
Understanding Property Insurance
There are three types of property insurance: replacement cost, actual cash value, and extended replacement cost.
Replacement cost insurance is based on the cost of repairing or replacing property of equal or greater value than the item that was lost or damaged. Instead of receiving the monetary value of the item, you will receive the price of the new item.
Actual cash value coverage pays the owner or lessee the replacement cost after taking into account depreciation. This means that if the damaged or destroyed item was 4 years old, the insurance company will pay the value of the 4-year-old item, not the new one.
Extended replacement costs will cover more than the cover limit if the cost of construction has increased, although this usually does not exceed 25% of the limit. When you buy insurance, the limit is the maximum amount of benefits that the insurance company will pay for a given case.
Other Considerations
Homeowners insurance typically provides coverage for physical loss or damage caused by 16 perils, including fire, vandalism and theft. This type of cover, known as an HO3 policy, includes some conditions and exclusions. These policies typically limit coverage for certain valuables such as gold, wedding rings, furs, cash, firearms and other items. HO3 does not include accidental breakage/damage or mysterious disappearance of valuables such as fine art and antiques.
- 16 named hazards:
- Fire or lightning
- Gale or hail
- Explosion
- Riots
- Aircraft
- Vehicles
- Smoke
- Vandalism
- Theft
- Falling objects
- The weight of ice, snow or sleet
- Accidental release or overflow of water or steam
- Sudden and accidental tearing, bursting, burning or bulging
- Freezing
- Sudden and accidental damage due to short circuit
Volcanic Eruption
HO5 coverage is similar to HO3 policies, but is more focused on the structure of the home and the possessions within it, including furniture, appliances, clothing and other personal items. This coverage does not include earthquake or flood protection. HO5 policies are available for homes built in the last 30 years or renovated in the last 40 years and generally cover damage up to the cost of replacement.
Also known as renter’s insurance, HO4 insurance is designed to protect renters against loss of personal property and liability coverage. It does not provide cover for the actual rented house which should be covered by the landlord.
None of these policies apply to property that breaks down or is damaged due to normal wear and tear, such as a leaky roof caused by regular use. Home warranties can be helpful in these situations.
Key Things
Property insurance refers to a range of insurance policies that offer property protection or liability coverage.
Property insurance can include homeowners insurance, renters insurance, and flood insurance, among others.
The three types of property insurance include replacement cost, actual cash value, and extended replacement cost.
Property Insurance Litigation
If your property has been damaged and you are having trouble getting a settlement from your insurance provider, it may be beneficial to contact an insurance attorney. An attorney can evaluate your case and provide advice on how to proceed most effectively, as the claims process can often get bogged down in disputes. People rely on insurance providers to be there for them when times are tough, but unfortunately sometimes insurance companies fall short of their commitments or our expectations. Talk to an insurance attorney if you need a helpful resource to navigate the claims process.
- Insurance law
- Builder’s risk
- Be
- Ownership
- Commercial real estate
- Business general liability
- Car Accident Lawyer
- Property damage claims
- Wind
- Hail
- fire
- Water
- Hurricane
- Smoke
- Our lawyers
- Jennifer LeMaster
- Nejat Ahmed
- Joey Maldonado
- About our company
- Client testimonials
- Corporate news
- videos
- Areas where we provide services
- Harris County
- Montgomery County
- Galveston County
- Dallas County
- Collin County
- Webb
