Insurance involves paying a given relative small amount of fee to an insurance company in exchange for a guarantee from the company to bear the burden of making good — in part or whole — any large and uncertain losses in the future. Property insurance in itself protects in the case of a damage of personal property, such as a dwelling place, a car etc. Property insurance exists in various forms e.g. auto insurance, homeowners insurance, renter’s insurance, and flood insurance etc.
Why Property Insurance
Imagine you own a property which for instance is a house, you continue to pay your property taxes, and so enjoy the use of that house for whatever you may wish. You may wish to live there, rent it out, leave it vacant, sell it, and do basically anything with it in peace and assured by the law.
Then, all of a sudden, incident like riot breaks out around the neighborhood, quarrels, looting and vandalism ensues causing severe damage to the properties. Now you have to cover the entire cost of repairing the house, and that With property insurance, the insurance company will take care of everything for your home to be fixed or replaced, sparing you an unexpected and probably affordable expenses.
Insurance policies are often written to cover sudden and accidental occurrences. If there were a gradual deprecation of the kitchen sinks due to corrosion or a rotting of the wooden structures over many months results to damages, these are often not covered by insurance. Typical dangers that are covered include:
- Vandalism or malicious mischief
- Riot or civil commotion
- Damage caused by aircraft or vehicles
- Windstorm or hail
- Volcanic eruption
There are a few considerations that help insurance companies in estimating the costs of property insurance. These consideration are based on the risk factors surrounding the property, for instance, how prone is an area to natural disasters like floods, tornadoes, hurricanes; Individual’s habits and lifestyle like smoking or availability or pets like dogs, cats etc.
Higher risk factors will usually attract a higher/ premium cost of service by the insurance company.
- Be aware of how your policy covers repairs. Covering the full replacement cost is better than just the actual cash value (ACV), but it will cost you more in premiums. On the other hand, ACV costs less than replacement cost coverage and it will pay what the property was estimated to actually be worth at the time of the damage.
- You should know what your policy does and—more important—does not cover. Insurance companies don’t stay in business by charging a minimal amount to cover any and all things which could possibly happen to your property.
- Insurance companies can provide unbelievable cheap or high rates for their policies. If the company is unknown and its rates are exceptionally good, it is a red flag. Always confirm the company’s reputation and don’t take a salesman’s word for it. On the other hand, you can always check other companies when your choice company has an overly priced rate. In all, go for reputable and reasonably priced rates and ensure to review the policies to know what it covers and doesn’t cover in line with your needs.