Definition of Property Insurance Coverage
Most people who own cars, homes, jewelry and businesses know that their investments are worth protecting. The most common way to protect such valuable items is with property insurance coverage.
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What Is Property Insurance?
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Property insurance is a contractual agreement between a property owner (the insured) and a business entity (the insurer). The agreement, or policy, usually names a dollar limit on the loss, if one occurs. The property insurance contract also stipulates the types of losses that are or are not covered, the person or persons who are eligible for benefits under the policy, and the predetermined time period within which coverage is recognized as in force or active.
Types of Property Insurance
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Property insurance policies can be issued to cover a variety of items. The most common types of property covered are homes, automobiles, businesses, boats, recreational vehicles, motorcycles, jewelry and other high-value items.
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How Property Insurance Coverage Works
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When a loss occurs, an insured contacts his insurance company and files a formal claim. The insurance company investigates the loss. If the language in the contract covers the loss, the insurance company repairs or replaces the insured's property, or otherwise compensates the insured for the loss, according to the terms of the policy.
Determining the Cost of Property Insurance Coverage
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The cost of property insurance is based on a system of intricate formulas that incorporate data derived from statistical studies. The statistical studies are designed to predict the likelihood that an insured will cause a financial loss to the company. Prices are set higher when an insurer feels that the financial risks of insuring an applicant are high, and are lower when providing coverage is deemed to be less risky.
How Property Insurance Coverage Is Purchased
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A variety of companies underwrite property insurance policies. Consumers interested in purchasing property insurance coverage should obtain three or more estimates before choosing an insurer.
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