Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or boiler insurance. Property is insured in two main ways—open perils and named perils.
Open perils cover all the causes of loss not specifically excluded in the policy. Common exclusions on open peril policies include damage resulting from earthquakes, floods, nuclear incidents, acts of terrorism, and war. Named perils require the actual cause of loss to be listed in the policy for insurance to be provided. The more common named perils include such damage-causing events as fire, lightning, explosion, and theft.
Types of Coverage
There are the three types of insurance coverage.
Replacement cost coverage pays the cost of replacing your property regardless of depreciation or appreciation. Premiums for this type of coverage are based on replacement cost values, and not based on actual cash value. Actual cash value coverage provides for replacement cost minus depreciation. Extended replacement cost will pay over the coverage limit if the costs for construction have increased. This generally will not exceed 25% of the limit. When you obtain an insurance policy, the coverage limit established is the maximum amount the insurance company will pay out in case of loss of property.
This amount will need to fluctuate if homes in your neighborhood are rising; the amount needs to be in step with the actual value of your home. In case of a fire, household content replacement is tabulated as a percentage of the value of the home. In case of high-value items, the insurance company may ask to specifically cover these items separate from the other household contents. One last coverage option is to have alternative living arrangements included in a policy. If a fire leaves your home uninhabitable, the policy can help pay for a hotel or other living arrangements.
Fire insurance in India
Fire insurance business in India is governed by the All India Fire Tariff that lays down the terms of coverage, the premium rates and the conditions of the fire policy. The fire insurance policy has been renamed as "Standard Fire and Special Perils Policy". The risks covered are as follows:
- Dwellings, offices, shops, hospitals.
- Industrial, manufacturing risks.
- Utilities located outside industrial/manufacturing risks.
- Machinery and accessories.
- Storage risks outside the compound of industrial risks.
- Tank farms/gas holders located outside the compound of industrial risks.
The following causes of loss are covered:
- Explosion, implosion
- Aircraft damage
- Riot, strike
- Storm,including hailstorm, cyclone, typhoon, tempest, hurricane, tornado, flood & inundation.
- Impact damage
- Malicious damage
- Subsidence, landslide
- Bursting or overflowing of tanks
- Missile testing operations
- Bush fire
The following are excluded from insurance coverage:
- Loss or damage caused by war, civil war, and kindred perils.
- Loss or damage caused by nuclear activity.
- Loss or damage to the stocks in cold storage caused by change in temperature.
- Loss or damage due to over-running of electric and/or electronic machines.
Claims In the event of a fire loss covered under the fire insurance policy, the insured shall immediately give notice thereof to the insurance company. Within 15 days of the occurrence of such loss the insured should submit a claim in writing giving the details of damages and their estimated values. Details of other insurances on the same property should also be declared.