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Property Insurance - What Is It & How Do We Safeguard It?

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Published on April 8, 2021. EST READ TIME: 2 minutes

What is Property Insurance?

Property insurance is an umbrella term which encompasses a number of policies which provide insured property owners with either property protection coverage or liability coverage. Insurance companies which issue such policies provide financial reimbursement to the owner or renter of any given structure and its contents in the event that they are damaged, or any theft occurs. Additionally, they also provide fiscal relief to any individual other than the insured owner or renter in case they are injured or harmed on the insured property. Policies included under property insurance include but aren’t limited to homeowner’s insurance, renter’s insurance, flood insurance and earthquake insurance.

Why is It Important?

PROPERTY INSURANCE accounts for a number of issues that might damage a given property. These issues include weather-related damage as well as fire/ smoke/ wind / hail and lightning related destruction. In the event of vandalism and theft occurring on a property, property insurance has insured property owners covered. Liability coverage can protect property owners against high expenses brought on by any party injured on site deciding to sue.

Types of Coverage Under Property Insurance -

Property insurance available today offers coverage primarily in three different forms mentioned below.

➔ Replacement Cost - Refers to the costs associated with repairing or replacing property at the same or equal value. Coverage plans that provide this consider replacement cost values rather than the cash values of items when determining the price of their policy.

➔ Actual Cash Value – Under this scheme, the insured property owner or renter receives the replacement cost minus depreciation. This means that if the destroyed or lost item is 5 years old, the insured owner or renter receives an amount equivalent to a 5-year-old item instead of a new one.

➔ Extended Replacement Costs – This form of property insurance will pay the insured in addition to their coverage limit in the event that the cost of construction has risen. However, this amount ordinarily does not exceed more than 25 per cent of the coverage limit.

Premiums on Property Insurance

The following factors might result in individuals having to pay varied premiums for their property insurance.

➔ If the property under consideration is located in a locality which is prone to natural disasters like floods or earthquakes, the costs associated with damage control can be extensive. This is why individuals need to pay a premium in order to sufficiently protect themselves.

➔ Old properties currently not in their prime which might be experiencing structural challenges in their present form can also incur higher premiums on their property insurance.

➔ Based on a given property’s security system in place, premiums charged vary. Properties boasting the most advanced forms of security systems may accrue lower premiums as opposed to those with poor or no form of security systems in place.

➔ Additional valuables on site which are to be insured can increase the premium needed to be paid. These can range from art and artefacts to jewelry and other luxury items.

➔ The market value of a given property can impact the price point of the premium to be paid on its insurance. Property which has a high market value can increase the value of the premium paid on it as the sum insured will consequently be greater.

What isn’t Included in Property Insurance?

While PROPERTY INSURANCE is fairly broad in the range of events it provides coverage against, there exists a select number of events it does not provide coverage for. These include damages incurred from tsunamis, floods, seeping groundwater, standing water, drain and sewer backups, floods and several other water related issues. Additionally, most property insurance policies do not cover extreme circumstances such as damage or loss brought on by nuclear events, acts of war or terrorism.

Conclusion

Property insurance is an important investment that all homeowners and renters must avail of such that they can gain financial security in the event that their property is faced with any damage or loss. Certain factors might increase the price of the premium paid on property insurance.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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