Property insurance is a type of insurance taken against a physical property. It provides protection against most risks such as fire, theft and weather damages.
Property insurance also includes such specialized forms of insurance as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance.
Property can be insured in one of two main ways—open perils and named perils insurance. An open peril insurance covers all causes of damage to the property which are not specifically excluded in the insurance policy. These types of insurance commonly exclude damage resulting from earthquakes, floods, nuclear incidents, acts of terrorism and war. On the other hand, named perils insurance list the actual cause of loss in the policy. Only those listed in the policy may be covered in the insurance. Most common named perils are damage caused by events such as fire, lightning, explosion and theft.
One of the most common open perils insurance policies is the home insurance or homeowner’s insurance policy. This is an insurance policy which combines various personal protections which include losses to the policy insurance holder's home, its contents, loss of its use, loss of other personal possessions of the homeowner as well as liability insurance for accidents happening within the home.
The cost of homeowner’s insurance usually depends on the cost it would take to replace the house and whatever additional rider items are to be attached to the policy. The insurance policy papers is usually a lengthy contract and names in particular what will and what will not be paid in the case of various events. Events such as earthquakes, floods, “Act of God” or war are typically excluded. The definition of war typically includes a nuclear explosion from any source. For these excluded items, special insurance can be purchased for such possibilities.
Home insurance policies are often term contracts. This means that it is in effect for only a fixed period of time. Payment for to the insurer by the insured is called a premium and is paid to the insurer at each term. Insurers usually charge lower premiums if it seems unlikely the home will be damaged or destroyed.
An example of named perils insurance property is the earthquake insurance form of property insurance. This type of insurance, as its name suggests, pays the policy holder a certain amount in the event that an earthquake causes damage to the property.
Earthquake insurance policies usually have a high deductible which is useful in cases where the entire home is destroyed. However, it has limited use if the home is merely damaged. Premium rates for these types of insurance usually depend on the location and probability of the event. Wooden houses may have lower rates than brick houses due to the fact that wooden houses withstand earthquake better.
Like most insurance dealing with natural disasters, insurance companies are often careful when assigning this type of insurance as a disaster that is strong enough to destroy one single home in a certain area is liable to destroy a dozen homes in the same area. Insurance companies invest a lot of study and effort toward risk a management to avoid such situations.
by Maria-Goldsmith 1 year ago
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