Property / Homeowner's Insurance - What it is and how it works

Home / Property Insurance When you buy a home or own a structure, you place yourself at risk for loss of the building due to damage and being sued if someone gets hurt on your property. Property insurance in its various forms provides a financial protection against such situations. In some cases, when the property has been purchased via financing, the lender may require property insurance be in place to protect the structure. This is particularly true if the structure and the property it is on has been used as collateral for the financing. A burnt-down home or warehouse doesn't do a bank lender much good if the borrower then defaults and there's no viable collateral to sell off for recovery. Property insurance is most commonly seen as either homeowner's insurance or renter's insurance for private individuals. The traditional version, homeowner's insurance, provides two purposes: it protects the structure by providing financing to pay for repairs should the home get damaged; it protects the contents in the house should they be damaged or stolen as well. Much depends on how the home structure and its contents are detailed in the agreement. If a specific form of damage or content is not covered, it doesn't get paid for later on when damage occurs. The client's claim instead gets denied. Homeowners also need to think about how to use their property insurance with respect to their home. It is generally intended to be used for catastrophic recovery. This would be the case if the home was burned down, flooded, smashed into, vandalized, etc. It is not intended to be used for patching stucco, repairing a bent mailbox stand, fixing a broken window. Too often homeowners use their insurance policy for small repairs to avoid up-front costs, and then pay exorbitant amounts later with increased insurance rates for years. One method of focusing a homeowner's insurance on catastrophic use instead of maintenance is to opt for a higher deductible in the policy. This reduces the cost of the policy for the homeowner and forces minor repairs and issues to be out-of-pocket, regardless of convenience later on. Renter's insurance works similar to homeowner's insurance, however, it mainly just covers contents in a rented property. Unlike the homeowner, the renter doesn't own the property so the structure is not a concern for the insurer. Renter's insurance tends to be far cheaper and mainly provides recovery for items that get damaged, destroyed or stolen. Again, the items need to be specifically listed in the agreement to be insured and claimed later on. Commercial property insurance focuses on providing financial recovery for businesses. The cost will vary depending on whether the business is renting or owns the facility covered, whether the policy covers inventory, surrounding areas and risks, whether disaster protection such as fire alarms/sprinklers and break-in security systems are present, and how much the business is willing to pay for protection. The major cost for the business, particularly one that sells product and goods, tends to be protection of inventory. Since inventory levels vary and change in size and value, insurers take on significant risk not really knowing any given day what is insured. As a result, costs are based on the businesses data of tax-reportable inventory as a validated figure. Capital equipment and office network equipment can also be a significant expense and recovery will require replacement value coverage as opposed to depreciated coverage. The facility structure itself tends not to be such a big issue as most offices or warehouses are generic and can be interchanged based on the type of business.

Insurance Site .org

Introduction Business Vehicle / Auto Property Health Insurance Life Insurance Worker’s Compensation Auto, Home, Life, Health, Business - How Insurance Works