Property Insurance

What is property insurance?

Property insurance refers to the protection of your personal property and liability by an insurance provider. For example, a renters, homeowners, or condo insurance policy is an example of property insurance. If your home or personal belongings were to be damaged or destroyed in a covered loss, your property insurance would be used to replace it. Let’s explore the key considerations of property insurance including what is covered, what is excluded, and how your premium is calculated.  

1. What is property insurance?
2. What is covered?
3. What is excluded?
4. How is your premium calculated?

Property insurance definition and details

Property insurance covers you, your home, and your personal property against loss or damage. Below are the most common types of property insurance.

Home insurance

Home insurance comprises five primary coverage types:

1. Dwelling: This covers the replacement cost of a home. If the dwelling were to burn down, the insurance would cover up to the cost needed to rebuild — not necessarily the full value of the home.
2. Other structures: This insures detached garages and fencing.
3. Personal property: This covers personal belongings, including clothing, books, art, and electronics.
4. Personal liability: If someone sustains an injury at your home or you’re sued, personal liability can provide assistance.
5. Loss of use: If your home is deemed unliveable due to a covered loss, this coverage pays for the cost of living elsewhere.

Each of these coverages has coverage limits.

Renters insurance

Because you do not own your rental residence, renters insurance only covers your personal property and your liability. It’s not required by law, but renters insurance is a good investment in order to protect your personal belongings and cover your liability in the event of an incident at your rental property.

Condo insurance

Condo insurance varies based on the details of your condo ownership situation. If you own your appliances and cabinets, your insurance will cover that. In general, a condo policy covers a unit's walls, floors, and ceilings. Condo insurance policies also include personal property coverage, liability, and additional living expense insurance.

Earthquake insurance

Most standard home, renters, and condo policies exclude earthquake damage. You can either add coverage to your policy through an endorsement or purchase a stand-alone policy. Although earthquake insurance is not required, it is a good idea if you live in an earthquake-prone area.

Earthquake insurance only covers damage to your dwelling, personal belongings, and your additional living expenses.

Flood insurance

Damage caused by floods is excluded from renters, homeowners, and condo insurance policies. Unlike earthquake insurance, homes located in flood plains are required as part of many mortgage agreements to carry flood insurance. Flood insurance is available through the National Flood Insurance Policy (NFIP) and some private insurance companies.

NFIP will cover costs of up to $250,000 to rebuild a home and/or up to $100,000 to cover personal property. Flood insurance typically does not provide coverage for additional living expenses.

Now that we’ve outlined what property insurance is, let’s outline what it protects your home and contents against.

What is covered by property insurance?

Earthquake and flood insurance policies are very specific about what they will and will not cover. But homeowners, renters, and condo insurance are a little different. The following are considered covered losses within standard property insurance policies:

1. Lightning or fire
2. Hail or windstorm
3. Damage caused by an aircraft
4. Explosions
5. Riots or civil disturbances
6. Smoke damage
7. Damage caused by vehicles
8. Theft
9. Vandalism
10. Falling objects
11. Volcanic eruption
12. Damage from the weight of snow, ice, or sleet
13. Water damage from plumbing, heating, or air conditioning overflow
14. Water heater cracking, tearing, and burning
15. Damage from electrical current
16. Pipe freezing

Bear in mind, this is a very general list. Depending on your property insurance policy, your list of covered threats could be more comprehensive.

What isn’t covered by property insurance?

Earthquakes and floods are not covered by property insurance. Below are additional threats not covered by property insurance:

1. Mold
2. Acts of war
3. Parts of the property in disrepair
4. Intentional acts
5. Earth movement/landslides
6. Ordinance of law

Your specific policy will determine if you have more or less coverage, but the above list usually applies.

How are property insurance premiums calculated?

Property insurance rates are calculated using your personal information and information related to what is insured.

This includes:

1. Your age
2. Location
3. Credit score (used to determine risk)
4. Your coverage requirements
5. The value of the insured asset, such as a condo or house
6. Additional coverage options
7. Claims history

If you own or occupy a residence, you should familiarize yourself with property insurance and verify you have appropriate coverage. Read more on property and casualty insurance.