Getting started in the game for property insurance can feel overwhelming, since there’s a great deal of terminology, optional riders, and questions you’re likely to have regarding what you need and how you should approach the process.

Taking some time to educate yourself beforehand can be critically important for selecting the right policy for you. In the event of property damage, your insurance policy structure will determine what benefits you will receive, so it’s worth the time investment to select the appropriate plan for you.

Going without property insurance can be devastating for you and your family. According to the Insurance Information Institute, about 7% of insured homes suffered losses in the year 2011, and 98% of those claims related to property damage. The good news is that by purchasing a policy, you can mitigate against the risk of property damage (including theft).


Policy Basics

Property insurance is an umbrella term for several different types of policies that protect you against property damage risks, like theft, fire, and some forms of weather damage. The specialized policies under this umbrella can include home insurance, boiler insurance, earthquake insurance, fire insurance, or flood insurance. Generally, your property insurance coverage will cover all perils except those included in the policy. Verifying what’s excluded in your policy is critical in the event that you believe you are covered after a certain incident, only to learn that you’ll be responsible for damage yourself. For example, pay extra attention to what forms weather-related natural catastrophes are actually included in the policy. In 2012, weather related losses around the world topped $69 million.


The i’s on Insurance: Your Homeowners Coverage | iii Insurance Information Institute









Key Policy Terms to Know

If you’re just getting started in the hunt for property insurance, there’s no doubt you have already encountered some of the associated terminology that can make it difficult to understand what your policy actually says. Below are a few examples of terms frequently used in relation to property insurance:

Actual Cash Value (ACV): This is the amount that the insurance company will pay for damages to covered property after making the deduction for depreciation. This refers to the cost of a replacement item while taking depreciation into account.

Additional Living Expenses Coverage (ALE): With this form of coverage, your policy might cover the gap to meet your normal living expenses when a direct loss has made your current living quarters uninhabitable.

Deductible: The deductible, much like other forms of insurance, is the portion of a covered loss that will be paid by you before the insurance company steps in to pay their part of the damage. Going with a bigger deductible will generally mean a lower premium for you.

Replacement Cost Value (RCV): This is the maximum amount the insurance company will pay for damages to covered property before the deduction for depreciation.  This amount is based on the current cost to replace your property with new or identical items.


If You Suffer a Property Loss

If you suffer a property loss, such as a fire or flood, in your home, you must proceed carefully. There are many different challenges that a homeowner can face in the immediate aftermath of a big loss. One of the first steps, according to FEMA, is to contact your insurance company. It’s easy to feel confused and dazed directly after a loss, but your insurance company will be extremely helpful in guiding you through the process of what to expect and collecting the necessary information to initiate your claim. That’s why identifying a property insurance company with a dedicated background in customer service is necessary.

The claims process begins with this phone call to your insurance company. If there is major damage to the property, you should also contact authorities before attempting to enter the structure on your own. Turn off water mains and electricity where possible to prevent future damage and injuries. If you have a camera or cellphone with a camera, begin to document the damages for your own purposes as well as for the insurance claims process. Once the insurance company has received information about your claim, you will be appointed a case manager who will work with you to get the claim processing and payment completed as quickly as possible.


Avoiding Insurance Mistakes: Five Tips | iii Insurance Information Institute