Property insurance originated with fire insurance, but its meaning has expanded to cover many more types of risks, such as natural disasters (floods, wind damage, storms, earthquakes, etc.) and theft. Since your house is probably the most important investment that you will ever make, you should certainly want to protect it from any possible loss. Even though the possibility that a fire or natural disaster will destroy your house is remote, you should not take the risks, as the cost of rebuilding a house is very high. Another type of coverage is neighbor liability, which is similar to third-party liability coverage in motor insurance. Neighbor liability covers damage to a neighbor's property. For example, if a tree from your property falls into a neighbor's property or if a fire spreads from your property into a neighbor's property, neighbor liability would cover the resulting damage. Neighbor liability coverage may be as important as coverage of your own property.
FIRE (CONTENT AND CONSTRUCTION)
While the meaning of the term fire seems simple, insurance companies have their own, legalistic version. Something is defined as on fire if in normal circumstances it ought not to be on fire or undergoing the application of heat. This would mean, for example, that a cake burning in the oven is not considered as fire. Flames leaping out of the sofa are a different story! Generally, when a house is mortgaged, the lender insists that it is insured, to guarantee that the payments will continue even if the house is destroyed. In cases where the apartment or building is not subject to a mortgage, the owner usually pays the insurance, at least for the house. However, if the apartment is rented, the tenant is sometimes required to bear part of the cost, which may be included indirectly in the rent. There is a clear separation between insurance for a building and cover for the contents of that building. With regard to furniture, fixtures and fittings, and personal belongings, tenants need to arrange a separate insurance policy. While the building or apartment is a recognizable major investment, the cumulative value of personal belongings acquired over years can easily be underestimated. It is therefore worthwhile to increase contents cover from time to time to keep pace with new acquisitions. However, reality is the key here, since attempts at over-insurance are a waste of money. No insurance company will pay out, on theft for example, for expensive items that are clearly out of the range of the insured (and therefore probably don't exist). What is applicable to tenants with regard to possessions is, of course, equally relevant to homeowners.
The basis of property insurance is against the risk of fire and most other circumstances become add-ons to the policy. Although "natural disaster" is most often taken by people outside the insurance business to mean an earthquake, in fact the term can cover a lot of other circumstances as well. It may provide protection against wind damage, storms, floods, landslides, torrential rain, or other non-human inspired events. However, a building that collapses after heavy rain has undermined the foundations may not be covered if there has been negligence in the construction. Cover against natural disasters can be applied to the homes themselves, personal belongings, or the land the property is on, or any combination of the three. There is an extra charge for insurance against natural disasters and clearly this is higher if the property is located in an area known to be prone to earthquakes. Deductibles often apply to this kind of cover to prevent endless claims for replacing a few tiles being hurled from the roof by a high wind. Again-as in all insurance-careful reading of what is and what is not covered is required. Although both the house and the contents may be insured on a replacement value basis, there is always an upper limit to the amount you can claim. Specific items of high value, such as jewelry, may be subject to special conditions, such as the provision of a safe. And frequently, insurance companies seek a detailed list of such items, perhaps with independent valuations and photographs.
THEFT AND LIABILITY
The theft cover is usually restricted to items taken after a forcible entry of your home. So theft by a maid or guests may not be covered. Nor is theft during or after a fire-more properly called looting-usually covered under the theft clauses of a home insurance. Property insurance can also be extended to cover neighboring liabilities-also called neighbor's recourse. Such an addition covers damages done to neighboring properties as a result of fire coming out of your property or destruction or any damage to it. It is very similar to third party liability in motor insurance.
There is no fixed range for property premiums, especially since so many details are involved in its calculation. The type of property, its structure (cement, reinforced concrete, wood), the location, the date of its construction, and the number of stories all play a role in determining the risk rate. Risk is also measured for the content, furniture, equipment, safes, as well as the electricity, heating and air-cooling, water systems, stocks of gas and oil supply for domestic use, and generators. The fire protection available, such as fire extinguishers, sprinklers, and fire alarms, detection systems, and fire hoses can diminish the risk rate. Other security measures are also important, such as easy access for the fire brigade and civil defense, the presence of security guards, surveillance systems, video cameras, and 'no smoking signs' etc.
The availability and frequency of maintenance is also significant and is taken into consideration. Previous losses can increase the risk rate of your property, but concealing previous claims-perhaps from a different company-will not eliminate this problem; it will merely invalidate your insurance. Which floor of a building you live on can also affect the rates for content cover, with ground floor flats being considered at greater risk. Some companies may insist on bars covering the windows.
Average rates are usually appointed to each type of risk, fire, natural disaster, theft and neighboring liabilities, depending on the type of property. Those rates are taken as a starting point and will vary after the study of each case. The rates are usually given as per thousand of the sum insured for each type of coverage.
When natural disasters are added to the property insurance policy, one percent of the value of the content and the construction is applied as a deductible. This means that in case of an earthquake, for example, the insured will have to pay that amount of the replacement value of the property's construction and content, and the insurance company will bear the rest. A higher deductible, 10 percent of the value of the claim, is usually applied for water damage, such as from bursts or flooding and natural perils. Deductibles are imposed to reduce the premiums for property that otherwise, relative to other insurance policies, are very high, and, as noted above, to eliminate small claims.
Like all insurance policies, property cover also has exclusions, which in some respects are even more critical because more details are involved in property insurance. The most common exclusions are: Incidents arising out of any breach of the law by the insured;
Direct or indirect consequences of hostile act or acts of war, strikes, riots, and/or civil commotion;
Premeditated or intentional damages caused by the insured himself, or as a result of a conspiracy with the insured;
Damage caused as a result of negligence, such as leaving lit cigarettes, heaters, or cookers unattended;
Theft of belongings during a fire;
Vandalism during a political demonstration; and
Exclusions are detailed in the policy and some can be waived, subject to the payment of an additional premium.
APPLYING FOR PROPERTY INSURANCE
The property application form is one of the longest in terms of detail. In addition to the name of the applicant (whether tenant or owner), the companies require the full address of the property, the plot number, the type of property (residential or office, retail or factory), the storey to be insured, and the period of insurance. Other sections in the application would concern the sum to be insured, broken down into building, contents, neighbor's recourse, and other risks. Particulars of the building, the furniture, and the machinery or equipment are also required, as well as the fire protection measures available. A detailed description of the neighborhood is also required, and there is a complete section to be filled in with regard to theft insurance, if that is taken as part of the policy. This section details the particulars of the main entrance and other doors and windows, and would inquire about the security measures, such as locks and alarm systems. The insurance company will usually study each case by itself and assess it accordingly. Sketches and/or photos of the property should also be provided.
WHAT TO DO IF YOUR HOUSE IS DAMAGED?
As a rule, you must notify the insurance company within a maximum of three days of knowing about any damage done to your property. You will usually have around two weeks to provide a written declaration of the incident, which should include a detailed description of the damaged belongings and their estimated value.
When the insurance company is notified, an expert will be sent to the property to make an inspection and to estimate the value of the damage. His report to the company is very important in their decision on whether to pay and how much to pay. Your declaration should also mention whether all or some of the items for which you are claiming are also insured with other companies.
Any faulty declaration or concealment of information, even if unintentional, will at best result in the insurance policy becoming void, and at worst in a criminal prosecution for attempted fraud. After the claim has been assessed and processed, you will be reimbursed depending on the sum insured for each type of loss, whether resulting from burglary, fire, or other risks, such as water damage or earthquakes.