PROPERTY INSURANCE DEFINITION
A product that guards against the risk of financial loss due to damage or destruction of the policyholder’s primary residence, seasonal home, rental property, condo, mobile home, trailer, boat or watercraft. The cost of property insurance depends on:
- the value of the property being insured
- its location and risk of loss and claims history in that area
- how much coverage you purchased and your deductible, and
- whether you have taken any steps to mitigate losses
You can get a discount on your personal property insurance if you meet certain requirements. For example, your boat insurance premium may be lower if your boat has a built-in automatic fire extinguishing system or if you have a certificate from an approved boating course.
EXAMPLE
Angie needs to purchase property insurance for her new house. Not only does her mortgage lender require it, she would buy this coverage anyway because she could not afford to totally rebuild her house if it were destroyed by a fire or other disaster. Because her house was recently built and is located in an upscale neighborhood close to a fire station, the insurance company considers it to have a lower risk of claims. Crime is minimal in the area, and the home’s roof, electrical and plumbing systems are less likely to fail and cause damage to the home since they are new. Angie also lowers her property insurance premium by choosing a higher deductible, since she can comfortably afford to cover the first several thousand dollars’ worth of damage that might occur to her home.
FIRST FOUNDATION TIPS
Property insurance can also protect landlords from financial loss if a tenant damages the landlord’s personal property, and it can cover loss of rental income if a tenant moves out and can’t be replaced quickly or a unit becomes temporarily uninhabitable due to a covered loss. In addition, for a higher premium, a policyholder can supplement a basic property insurance policy to cover high-value items such as specialty equipment or jewelry. Lenders typically require the owner to purchase a minimum amount of insurance on any property they finance, but property insurance is generally optional for property that is owned free and clear.
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