Property Insurance Basics and Policy Coverages
Structure of a property policy
Homeowners policies use Coverage A (dwelling), B (other structures), C (personal property), D (loss of use), plus additional coverages (debris removal, trees and shrubs, reasonable repairs) and endorsements. Personal property is typically covered on premises worldwide for named perils on HO-3 contents, while special-form HO-5 covers both dwelling and contents on an open-perils basis. HO-4 (renters) and HO-6 (condo) cover contents and improvements, not the building.
Named vs. open perils
Named-perils forms list what is covered; open-perils ("special") forms cover everything except what is excluded. Flood and earthquake are excluded everywhere and need separate coverage (NFIP or a difference-in-conditions form).
Valuation and coinsurance
Actual cash value = replacement cost minus depreciation; replacement cost pays new-for-old without depreciation. The coinsurance clause requires the insured to carry a stated percentage of the property's value at loss:
Payment = (limit carried ÷ limit required) × loss, less deductible.
Worked example: 80% coinsurance, replacement value $500,000, so required limit is $400,000, but the insured carries $300,000. A $100,000 loss pays (300,000 ÷ 400,000) × 100,000 = $75,000, less the deductible. If the limit had met $400,000, the full $100,000 would be paid - coinsurance is a penalty only for underinsurance, never a reward for overinsurance.
Commercial property
Study the Building and Personal Property Coverage Form, the Basic/Broad/Special causes-of-loss forms, business income with the 72-hour waiting period, blanket vs. specific limits, agreed value, the mortgagee clause, the vacancy provision (vacancy reduces or suspends coverage), and ordinance-or-law coverage.