As a property owner, you want to ensure that your home or condominium is safe from any sort of damage. This may include damage from fire or a tropical storm, hurricane, tornado, or other severe weather event. However, damage to your property is not always avoidable, and this is where property insurance comes in.

Simply put, property insurance is a financial service provided to homeowners by an insurance company. This insurance is meant to make a property owner financially whole again after suffering costly damage or loss to their property. This brief article will cover the basics of property insurance by explaining how it works and outlining the different types of property insurance essential for homeowners.

How Property Insurance Works

Any insurance policy entails a contract between the policyholder and the insurance company. Accordingly, each party has certain obligations to fulfill. The policyholder must pay premiums on time and provide prompt notice of an insurance claim to the company. The insurance company is obliged to pay out a valid claim on time and in full.

Property insurance is typically undertaken to provide compensation for damage to a homeowner’s property such as broken water pipes, roof damage, water damage, mold damage, electrical and fire damage, and severe weather events like tornados and hurricanes.

When a homeowner files an insurance claim, the insurance company typically sends out a damage assessment adjuster who will evaluate the damage. However, the adjuster will likely be biased towards the insurance company that hired them and attempt to give the property owner a lower payout than they deserve or outright deny their claim.

Understanding Property Insurance

There are several different types of property insurance coverage that homeowners must understand before investing in homeowner’s insurance.

1. Replacement Cost Value

Replacement Cost Value or RCV means the insurance company is responsible for covering the cost of repairing or replacing the damaged property at equal value. Under such a policy, you should be entitled to replacement regardless of the depreciation of the damaged property. A Replacement Cost Value policy will have an additional premium over an Actual Cost Value policy because it provides much better coverage, as it’s supposed to put your property back to its pre-loss condition.

2. Actual Cash Value

Actual Cash Value or ACV means you will get paid the value of the damaged property minus the depreciation of that damaged property. In other words, if a 5-year old item is destroyed, and that item only has a 10-year useful life span, the insurance company only has to pay you the actual cash value for the five years of life remaining on that damaged item.

3. Extended Replacement Costs

According to an extended replacement costs policy, the insurance company will pay an amount higher than the coverage limit if construction costs have gone up since the time the property was constructed. In most cases, however, this will not exceed 25% of the limit.

4. All-Risk Policy vs. Named Peril Policy

An All-Risk policy covers any damage to your property unless such property damage is excluded in the policy. Whereas a Named Perils policy only covers those things that are specifically listed as covered in the policy.

Final Words

There are many different ways in which one can incur damage to their property. However, since the insurance industry is always trying to maximize profit, insurance providers try to give a lower payout than deserve or even deny the claim.

If you have sustained damage to your property due to a fire, tropical storm, hurricane, or other severe weather events, or if you have incurred roof damage, pipe burst, fire damage, flooding, water damage, mold damage, theft, or vandalism to your property, The Consumer Law Office (CLO) can help you receive the compensation you deserve under your insurance policy.

The experienced and dedicated Property Damage Attorneys of the Consumer Law Offices P.A. have helped thousands of homeowners, contractors, and businesses resolve their coverage disputes through strategic negotiation, mediation, litigation & conclusion at trial where necessary.

We at CLO are fully committed to reminding insurance companies that they are not as untouchable as they would like to believe.