Property Insurance Coverages, Exclusions, and Policy Provisions
What property policies cover
Property policies insure the structure and personal property against named perils (basic and broad forms) or against risk of direct physical loss (special form). The commercial causes-of-loss forms build in layers: Basic (fire, lightning, explosion, windstorm, hail, smoke, aircraft, vehicles, riot, vandalism, sprinkler leakage, sinkhole collapse, volcanic action); Broad (adds falling objects, weight of ice/snow/sleet, water damage, breakage of building glass); Special (open perils, subject to exclusions).
Core provisions
Coverages A (dwelling/building), B (other structures), C (personal property), D (loss of use or business income). Coinsurance requires insurance to value: (limit carried ÷ limit required) × loss = recovery, then subtract the deductible. The mortgagee clause protects the lender's interest even if the insured's acts void coverage. Loss may be paid at ACV, replacement cost, or agreed value. Other provisions to know: pair and set, salvage, appraisal, the abandonment prohibition, vacancy/unoccupancy limits, and ordinance or law.
Exclusions candidates must know
Earth movement, flood, neglect, intentional loss, freezing while the building is vacant, wear and tear, marring, deterioration, insects and vermin, and pollution.
Trap: wind-driven rain is covered only when it enters through an opening created by a covered peril - not through an open window or a defective roof the insured failed to repair.
Worked example: A building valued at $200,000 carries only $120,000 with an 80% coinsurance requirement ($160,000 required). A $40,000 loss pays (120,000 ÷ 160,000) × 40,000 = $30,000, less the deductible.
Rule of thumb: the coinsurance penalty is required limit ÷ carried limit, applied to the loss.