This article breaks down the essential basics of property insurance in simple, practical terms so you can feel confident in the coverage you choose. By knowing these fundamentals, you’ll be better prepared to protect your property, avoid surprises, and make informed decisions about your business insurance needs.
1. Covered Property
Protects physical assets such as buildings, business personal property (equipment, furniture, inventory), and sometimes outdoor property (signs, fences).
2. Covered Causes of Loss
Policies respond to damage from events like fire, wind, theft, and water damage. Coverage may be written on a named‑peril basis (only listed causes) or special/open‑peril basis (covers everything except what’s excluded).
3. Valuation Method
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Replacement Cost – cost to repair or replace without depreciation
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Actual Cash Value (ACV) – replacement cost minus depreciation
4. Exclusions and Limitations
Common exclusions include flood, earthquake, wear and tear, and mechanical breakdown. These often require separate policies or endorsements to be covered.
5. Business Income and Extra Expense
Reimburses lost income and ongoing expenses if operations are suspended due to a covered property loss. Extra expense coverage helps pay costs to resume operations faster.