Property Insurance

When damage, theft or loss of property occurs, it is difficult or even impossible to replace without insurance. Property insurance seeks to indemnify the assets, revenue and even intangibles (like trademarks and identity) of policy owners against damage, theft and loss.

Property protection operates in two main ways – covering either ‘named’ or ‘open’ perils. A policy that covers open perils covers any type of loss or damage to property unless the cause of loss or damage is explicitly stated in the policy contract. A named-peril policy requires that the cause of loss or damage be stated in the policy contract in order for that risk to be insured.

Property insurance covers the following perils:

a) Basic perils – these refer to the core perils that a particular property insurance contract covers. In the case of commercial fire insurance; fire, lightning and explosion constitute the basic perils. Naturally, basic perils form the bulk of coverage on most property insurance policies, particularly under general insurance coverage. 

b) Perils of nature – perils of nature are natural disasters. Hurricanes, windstorms, earthquake and volcanic eruptions are classified as such under property insurance. However, in some countries or states, flood insurance is not covered under property insurance. Insurers may provide coverage for damage that occurs by proximate cause for perils of nature. Perils of nature are often the subject of exclusionary clauses in insurance contracts, so those buying property insurance need to be cognisant of this in assessing the value of coverage.

c) Social perils – these include malicious damage, riot and strike.

d) Perils of a chemical nature – spontaneous combustion and explosion (excluding terrorist activity typically).

e) Miscellaneous perils – these include atypical perils like damage from impact by aircraft, vehicles or smoke damage, for instance.

Commercial and personal insurance are similar in several aspects. However, commercial insurance is far more robust than Homeowners’ insurance. For instance, commercial insurance may encompass other forms of insurance like auto and marine insurance- once it is part of the property of a business. Therefore, commercial vehicles require commercial insurance and cannot be insured privately once they are for use as part of a business.

When applying for property insurance, you need to have a lot of information and supporting documents. Location, occupation of insured/ business trade, building particulars, exposure to peril, context, occupancy, use, history and claims/losses history are just some of the underwriting factors required. With reference to commercial property insurance; protective appliances/ devices, proper accounts and a statement of profitability constitute necessary information.