What commercial property insurance covers
Property insurance protects against most of the common risks to property — fire, theft, and certain types of weather damage — and includes more specialized forms such as fire insurance, flood insurance, earthquake insurance, boiler insurance, or home insurance. Coverage is generally written one of two ways: 'open perils,' which covers every cause of loss except what's specifically excluded (commonly earthquakes, floods, nuclear incidents, terrorism, and war), or 'named perils,' which only covers the specific causes of loss actually listed in the policy, such as fire, lightning, explosion, or theft.
Types of coverage
There are generally three ways loss payments can be calculated. Replacement cost coverage pays to replace the property without subtracting for depreciation, with premiums priced accordingly. Actual cash value coverage pays replacement cost minus depreciation. Extended replacement cost pays somewhat above the stated policy limit if rebuilding costs have risen, typically capped around 25% above the limit. Because the coverage limit is the most the insurer will pay, it generally needs to be revisited as local property values change.
Contents coverage is often calculated as a percentage of the dwelling's insured value, and higher-value items may need to be scheduled separately. Many policies can also add coverage for alternative living arrangements, such as a hotel stay, if a covered loss makes the property temporarily uninhabitable.
Perils typically covered
Fire
Lightning
Explosion or implosion
Aircraft damage
Riot or strike
Terrorism
Storm, flood, or inundation
Impact damage
Malicious damage
Subsidence or landslide
Bursting or overflowing of tanks
Missile testing operations
Bush fire and similar perils
Common exclusions
Loss or damage from war, civil war, and related perils
Loss or damage from nuclear activity
Loss or damage to cold-storage stock caused by a change in temperature
Loss or damage from the over-running of electrical or electronic equipment
Making a claim
If a covered fire loss occurs, the insured should notify the insurance company right away. Within 15 days of the loss, a written claim should generally be submitted detailing the damage and its estimated value, along with disclosure of any other insurance covering the same property.