Property Insurance Basics
Named peril vs open peril
The single most tested distinction. A named-peril (specified causes of loss) form covers only the perils listed; the burden is on the insured to show the loss came from a listed cause. An open-peril (special form) covers all risks of direct physical loss unless excluded; the burden shifts to the insurer to find an exclusion. Never assume a form is open peril - check which coverage part is being described.
Standard exclusions
Learn the exclusion cluster once and apply it everywhere: ordinance or law, earth movement, water damage (flood, sewer backup unless endorsed), neglect, intentional loss, governmental action, war, nuclear, wear and tear, deterioration, insects, rodents, and pollution. Mold is either excluded or sub-limited.
Coinsurance
The coinsurance clause requires the insured to carry a stated percentage of the property's value (commonly 80%) or share the loss. The penalty formula is (insurance carried ÷ insurance required) × loss = payment, then subtract the deductible. If insurance carried is below the requirement, the insured is a coinsurer for the gap.
Valuation, deductibles, and endorsements
Losses are settled at ACV, replacement cost, or agreed value depending on the form. Replacement-cost settlement generally carries a repair-or-replace condition and, in homeowners forms, an 80% requirement to collect full RCV on partial losses. Common endorsements: mortgagee/loss-payable clause, inflation guard, extended coverage, water backup, ordinance or law, and business income. Note the difference between a loss payable clause (no protection for the mortgagee's negligence) and a mortgagee clause (the mortgagee's acts don't defeat coverage).
Worked example: A building has an $800,000 replacement value and an 80% coinsurance requirement ($640,000). The insured carries $480,000 and suffers a $100,000 loss. Payment = (480,000 ÷ 640,000) × 100,000 = $75,000, less the deductible.