How To Understand Property and Casualty Insurance

Property and casualty insurance cover most risks to an individual or business' property, including damage to, theft, or loss of money, records, furniture, machinery, trademarks, and supplies. This can include some specialized forms like fire insurance, earthquake insurance, home insurance, and flood insurance.

There are two ways that property can be insured: by named perils and by multiple (or open) perils. Named perils require that the exact cause of loss or damage be listed by the insurance policy for the property to be covered. For example, if you lost your home to a fire, named peril property insurance plans can only provide for you if your home was insured specifically against fire. Other commonly named perils are explosion, lightning, and theft. When availing of named peril property insurance, make sure that all possible risks are covered by your insurance plans. Otherwise, you may be paying for insurance that won't help you out should your car get stolen.

Open perils, on the other hand, cover all the causes of loss or damage that aren't excluded by the policy. The only time you can't get help from your open peril property insurance is when the papers say it can't. If floods are excluded by your plan, then you're not going to get covered should you lose your home in a flood. You can often find the following on a list of open peril exclusions:

  • earthquakes
  • nuclear incidents
  • war
  • acts of terrorism

While your property may be in danger from damage caused by earthquakes, you can purchase additional kinds of coverage you might need, just in case your open peril property insurance excludes earthquakes. This information can be quite helpful, especially if you're on the West Coast. East Coast and Midwesterners, on the other hand, may want to look into plans that cover snow, sleet, and ice damage.

Property insurance premiums can be lowered if they have good claim histories and have excellent measures in place that reduce the risk of loss or damage. Alarms, smoke detectors, sprinkler systems, and security personnel can all help reduce the costs of property insurance. It all depends on how well these measures can prevent loss or damage.

A lot of businesses opt for property insurance via a Business-Owner's Policy (BOP). In these policies, property insurance and liability insurance are combined into a single policy. Some BOPs include extra expense and business interruption insurance as optional coverage. Extra expense insurance covers the costs of temporary relocations should a covered peril occur. If you have to move because of a flood, extra expense insurance will pay for moving costs. Business interruption insurance, on the other hand, provides payments for any loss of profit that may be incurred should your business be interrupted.

The drawback to the convenience, however, is that the amount of coverage in a BOP is typically lower than standard property insurance policies. Because of this, most companies in which a generous amount of coverage is needed purchase separate policies for necessary coverage.


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