What is a property insurance and what does it covers?

Why do you buy any insurance? Be it any insurance policy, the major reason to buy a policy is to get financial aid to settle a loss or damage. One such important insurance policy is a property insurance policy. Property insurance is like a basket that offers various policies. This basket usually includes homeowner’s policy, renters policy, earthquake insurance policy, flood policy, etc. These policies cover home as well as other personal liabilities.

When you invest in an insurance plan, you must pay premiums at regular intervals, and in return, you can get a settlement for the cost of damage. As per the name, a property insurance plan covers your property and its contents against the cost of damage caused by various man-made and natural calamities. While living in the house comfortably, you may not feel the need to buy property insurance. But when a natural calamity like a flood strikes or a robbery takes place at your house damaging your property, then with no financial aid, you might find yourself facing a huge burden of repairing those damages. To avoid such a situation, you need to invest in a good property insurance plan.

To understand property insurance better, let’s see the types of coverages it provides. Mainly, insurance coverage is offered in three types- actual cash value, replacement cost, and extended replacement costs.

Replacement cost – This coverage covers the cost of replacement or repair of the property at the same or equivalent value. The coverage amount you receive under this cover is based on the replacement cost of the item and not on the cash value of the items.

Actual cash value – This coverage pays the replacement cost after deducting the depreciation cost to the owner or renter of the house. This means if an individual bought a property at ‘x’ amount 10 years back, then he/she will receive coverage based on its current depreciated value.

Extended replacement costs – This cover has a benefit of providing coverage amount more than the decided coverage amount in case the cost of construction has increased. This extension usually doesn’t exceed 25% of the limit.

How you get benefitted from property insurance depends majorly on what is covered under the policy.

What can be covered additionally when you buy property insurance online?

  • Liability Coverage – Typically, property insurance covers the cost of damage to repair your property or contents of your home after suffering a loss. Some property insurance policies provide liability coverage, as well. This may not look very important to add in your property insurance, but considering the lawsuits filed against people regarding the property, you must consider opting for this coverage. For instance, if your neighbouring house catches fire because of a fire outbreak in your house, then you may have to pay for the damage to your neighbour’s house. In such a case, liability coverage comes handy.
  • Additional Coverage – A basic property insurance coverage does not cover home-based business. However, the business does not include study and must ensure you have a separate business. Although, these rules differ from state to state. This insurance cover gets cancelled in case the house remains vacant for a longer time.
  • Art and Jewellery – Many contents in your house may be luxury items like exclusive or expensive jewellery. To cover these items in basic property insurance is not possible. Hence, you need to cover them under a special floater. This comes as an add-on to your basic policy.

Make sure you research well and compare before you buy property insurance online.

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