Insurance companies like to separate property into several categories. These are:
- Real property. This might include your home, commercial building, an apartment building, or anything that has to go through an escrow closing.
- Personal property. This includes general contents, inventory, tools and equipment.
- Loss of use. If there was damage to your home, you might have to live elsewhere. If there was damage to your commercial property you may not have income coming from the use of that property. All of these scenarios can be covered under insurance.
Most property policies include coverage for fire, lightning, theft, windstorm, hail, aircraft and vehicle damage, riot, vandalism and malicious mischief, explosion and smoke damage, and removal of the damaged property from the premises.
The most preferred type of property policy is called “special form”. Special form policies can also be called “all risk coverage”. These special form policies usually provide coverage for everything but the listed exclusions. Therefore, you’re going to get coverage for things that collapse with the building like glass breakage or coverage for a burst pipe in the building.
It’s important to remember that all insurance coverage is based on accidental and sudden loss or damage. So if a condition exists over a long period of time there most likely would not be coverage for that. An example would be a slow leak over a number of years that causes dry rot.
The exclusions in the property policies typically are earthquake, flood, hurricanes, living in a windstorm area, wear and tear, and vermin like termites or mice, fraud, or dishonesty. Some property needs special coverage; for instance mobile equipment, money and securities, precious metals and fine art.