Property Insurance
Property insurance is designed to protect you against damage to your property caused by events such as fire, theft or damage caused by weather. Apart from generalized coverage, it is also possible to obtain specialized coverage such as earthquake or flood damage. Property is generally insured on the following basis:
-Open perils. This insurance covers damage caused by any event or happening that is not specifically excluded from the policy. Exclusions generally include earthquake, flood, nuclear incidents and acts of war.
-Named perils. This requires the actual cause of the loss to be specifically listed in the policy and could include fire, explosion and theft.
The protection from financial loss in a property insurance policy can work in the following ways:
-Replacement cost will pay for the cost of replacing your property without taking depreciation or appreciation into account.
-Extended replacement cost will pay for costs over and above the coverage limit if construction costs have actually increased. This will normally be limited to 25 percent of the amount covered.
-Actual cash value will pay out for replacement minus depreciation.
When you take out an insurance policy, the coverage limit that is established is the maximum that the insurance company will pay out. In case of a fire, the payout for the contents of a house will normally be limited to a percentage of the value of the house. You may opt to cover high-value items separately to avoid this limit. You may also opt for the cover to include the cost of alternative living arrangements if your house is not habitable after the disaster occurs.