Property Insurance Options

July 24th, 2010

fire image by Grzegorz Kwolek from Fotolia.com Property insurance may spell the difference between financial disaster and recovery. Property insurance options provide renters, homeowners or business owners protection against a range of possible losses. They enable property owners to feel confident that they will have the necessary funds to replace real estate, vehicles or prized possessions when incurring a loss, whether from an accident, theft or natural disaster.

Homeowner’s Coverage

A homeowners’ policy compensates the property owner for any structural damage to his home. The amount of the necessary coverage to make the owner “whole” depends on the “replacement cost” to rebuild the same home. The actual coverage the owner receives from the insurance company hinges on the amount outlined in the policy. Homeowners need to conduct periodic evaluations to ensure that they have the appropriate coverage to rebuild the same home in the event of total loss. For example, if the current replacement cost to build a similar home is $300,000, then a policy limit of $275,000 means that the homeowner would have to pay $25,000 out of pocket to complete the project. Most conventional homeowners’ policies cover some areas of personal liability. If a neighbor trips over a toy left in the yard and suffers injury, the policy may pay for medical expenses and related costs up to a certain amount. Homeowners with businesses, expensive jewelry or valuable art may need to purchase additional coverage. Homes in areas prone to floods, earthquakes or other natural disasters also require coverage beyond the standard policies.

Some homeowners’ policies offer coverage for personal property up to specific limits. Policyholders should check their coverage to ensure that they have adequate coverage for their most treasured possessions. These items can include electronics, clothing, jewelry and furniture. When purchasing personal property insurance, the policyholder must have a clear understanding of the difference between coverage that offers actual cost versus replacement cost. An actual cash value policy pays for the property based on the depreciated value or what it would cost to buy the same item used. The replacement cost coverage provides payout based on the cost to purchase the same article brand new.

Business owners purchase property insurance to protect and ensure they continue operating their enterprise should they suffer a loss. This may constitute one of the most prudent investments a businessperson can make. Owners can purchase coverage to limit their liability and have the necessary resources to replace damaged or stolen assets, such as equipment, machinery supplies or tools. Prudence also dictates having the appropriate coverage for lighting systems, office equipment, computers and accessories and any personal property used at the place of business.
Most policies start with basic coverage for events, such as smoke, riots, vandalism, fires and explosions. Typically, basic business insurance policies do not cover theft. Coverage that is more comprehensive entails a higher premium. “Special form” policies offer the most wide-ranging coverage. This coverage envelops all types of risk minus specified exceptions.