Property Insurance Basics and Policy Provisions
Policy anatomy
Every property form contains declarations (who, what, where, how much, deductible), an insuring agreement granting coverage, conditions (duties after loss, valuation, other insurance), exclusions, and definitions.
Perils and causes-of-loss forms
Named-peril forms list the covered causes; open-peril (special) forms cover all risk of direct physical loss unless excluded. The ladder runs from basic (fire, lightning, windstorm, hail, explosion, riot, vandalism, sprinkler leakage) to broad (adds falling objects, weight of ice and snow, water damage, breakage) to special (open peril).
Valuation and coinsurance
Actual cash value = replacement cost minus depreciation; replacement cost pays new without depreciation; functional and agreed value also appear. A coinsurance clause requires carrying a percentage (often 80%) of value or the loss is reduced: (limit carried ÷ limit required) × loss, then subtract the deductible. Other insurance is usually shared pro rata.
Traps
Deductibles apply per occurrence; pair and set loses value when one item of a matched set is damaged; debris removal, preservation of property, and mortgagee rights are additional coverages, not separate policies. Commonly excluded: earth movement, flood, nuclear, and loss during vacancy.
Worked example: Building value $600,000, 80% coinsurance required = $480,000. The insured carries $400,000 and suffers a $120,000 loss. (400,000 ÷ 480,000) × 120,000 = $100,000, less the deductible.