Property Insurance: Coverage and Claims Handling
Structure of a property policy
Property coverage is built from declarations (insured property, limits, deductibles), insured perils, exclusions, and conditions. Named-peril policies list covered events; all-risk policies cover everything except what is excluded. Read exclusions narrowly against the insurer and coverage grants broadly, consistent with the Code's interpretive rules.
Concepts to master
- Insurable interest and valuation: actual cash value (replacement cost less depreciation) versus replacement cost.
- Deductibles and how they apply per occurrence.
- Coinsurance and underinsurance: a coinsurance clause penalizes under-declared values.
- Typical exclusions: wear and tear, faulty workmanship, intentional acts, vacancy, and certain water damage.
- Mitigation duty: the insured must limit the loss; reasonable mitigation costs are usually recoverable.
- Proof of loss and the documentation required.
- Replacement cost conditions: often require repair or replacement within a set period.
Handling a property claim
Verify the policy and cause of loss, separate covered from excluded damage (for example, smoke damage covered while the fire's origin in faulty wiring is excluded), quantify each item, apply the deductible, and check for subrogation potential.
Traps in questions
Questions test whether an exclusion swallows a covered peril, whether a deductible applies once or per item, and whether depreciation is deducted. Watch for "resulting damage" arguments and for claims where the insured repaired before the adjuster inspected.
Worked example
A burst pipe damages flooring and a wall. The pipe's corrosion is excluded (wear and tear), but the resulting water damage is covered. The adjuster separates the excluded pipe repair from the covered water damage, applies the deductible once per occurrence, and documents the causation reasoning.