Property Insurance: Important Things You Must Know

What is Property Insurance?

It is always a good idea to protect your property from any unforeseen, unfortunate events such as a fire, theft, or weather damages.  Protecting is not merely installing anti-theft products or fire-alarms, it is an investment made to recover your losses in an event of a mishap such as a Property Insurance.

Property Insurance is protecting your property and its contents against all damages such that you may be reimbursed with reinstatement or renovation costs in case your property faces any damages.

Damages can be either nature-caused or man-made. Depending on these factors the business owners or homeowners can insure their property after assessing the risk of such threats.  You can actually insure everything that is a part of your property, from valuables and cash to accounts and records. Anything that holds some material value can be insured.

Specialized forms of insurance exist in the market and you can actually purchase the type of insurance that covers just what you would like to protect against such as windstorm insurance, flood insurance, earthquake insurance, crop insurance, fire insurance, theft insurance and many more. You can basically insure your property against some or all such perils by obtaining either an open peril policy or a named peril policy.

While open peril policy or all-risk policy covers all the causes of loss that have not been explicitly mentioned, named peril policy requires you to explicitly state the cause of peril.  Some examples of open peril policies can be losses due to floods, war, earthquakes etc. and those of named peril policies can be fire, lightening or theft. Specific insurance is available for insuring your property against particular causes of loss.

Open peril policies normally have a much wider scope and hence the premiums are higher when compared to named policies that cover only specified perils. Reimbursement however is largely dependent on factors such as what you have insured and what caused the damages after assessing the value of the property.

While obtaining a cover for your property, you may actually select from the two available options for reimbursement. The tow options are the Replacement Cost and Actual Cost. This means that if you purchased a ‘replacement cost’ policy for your property, you are eligible to receive the complete cost of reinstating your property. However, if you purchased an ‘actual cost’ policy, you may only be reimbursed the reinstatement cost minus the depreciation cost of the property.  Since most actual cost policies end up in lesser reimbursement amounts, reinstatement policies have more takers and promise a full recovery in the event of a major loss. Since reinstatement policies have higher premiums it is always advisable to protect your property against some common threats such as burglar alarms, fire alarms including backing up important data off the property is a good saving too. This is because, the insurance companies will first assess the potential risks before advising you on what policy will suits your requirements. Properties equipped with such facilities have lesser risks and hence the premiums will be much lower than properties without these.

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