Property Insurance Coverages and Policy Provisions
What a property policy promises
Property coverage responds to direct physical damage to covered property at a described location. Know which part of the policy controls: declarations (who, what, where, how much), insuring agreement, conditions, exclusions and definitions. Most property answers turn on a definitions or exclusions question, not the insuring clause.
Personal lines
Homeowners forms: HO-3 covers the dwelling on a special (open-peril) basis and personal property on a broad named-peril basis; HO-5 is open-peril on both; HO-4 is tenants - personal property only, no Coverage A; HO-6 is condo/co-op; HO-8 is for older homes using functional replacement. Coverages: A dwelling, B other structures, C personal property, D loss of use, E liability, F medical payments. Watch the sub-limits on money, jewelry, silverware and firearms, and the fact that personal property is usually settled at ACV unless endorsed to replacement cost.
Commercial lines
Causes-of-loss forms run basic (short named-peril list), broad (adds weight of ice and snow, water damage, falling objects, etc.) and special (open peril, subject to exclusions). The coinsurance clause is a rate incentive, not shared risk: insure to the required percentage of value and losses are paid in full up to the limit.
Traps
- Applying a coinsurance penalty to an agreed-value or blanket limit policy.
- Taking the deductible before the coinsurance penalty - it comes after.
- Treating vacancy (no people, no contents) as the same as unoccupancy.
Worked example: 80% coinsurance, value $500,000, required $400,000, carried $300,000, loss $100,000, deductible $1,000. Payment = ($300,000 ÷ $400,000) × $100,000 = $75,000 − $1,000 = $74,000.