Property Insurance Basics
Triggers and cause-of-loss forms
First-party property responds to direct physical loss that is fortuitous. Basic form perils are fire, lightning, explosion, windstorm, hail, smoke, aircraft and vehicle damage, riot, vandalism and sprinkler leakage. Broad form adds glass breakage, falling objects, weight of snow or ice, water damage and accidental discharge. Special form is open peril: everything is covered unless excluded, which shifts the burden of proof to the insurer on exclusions.
Limits, valuation, coinsurance
Coinsurance is a penalty formula, not a coverage grant: payment = (limit carried ÷ (coinsurance % × value at loss)) × loss, capped by the limit. Common exclusions are earth movement, flood, ordinance or law, neglect, faulty workmanship, wear and tear and contamination; watch anti-concurrent-causation wording, which can knock out a covered peril that follows an excluded one, and then look for ensuing-loss carve-backs.
Worked example
A building with a $600,000 limit, an 80% coinsurance clause and $1,000,000 value at the time of loss suffers a $200,000 fire loss. Required limit is $800,000. The ratio is 600,000 ÷ 800,000 = 75%. Recovery is 75% of $200,000 = $150,000, less the deductible. If the limit had been $800,000 or more, the full $200,000 would be payable, subject to the limit.
Ancillary coverages and conditions
Debris removal, preservation of property, and the mortgage clause (which protects the lender's interest independently of the owner's acts) are frequent test items, as are the appraisal condition, salvage, abandonment (never permitted) and pair-or-set provisions.
Traps
Applying coinsurance to blanket or agreed-value forms; forgetting that debris removal is usually additional rather than inside the limit; assuming a mortgagee loses its rights because the owner caused the loss.