Property insurance is a broad term for a series of policies that provide either property protection coverage or liability coverage for property owners. Property insurance provides financial reimbursement to the owner or renter of a structure and its contents in case there is damage or theft and to a person other than the owner or renter if that person is injured on the property.

Property insurance can include a number of policies, such as home owner’s insurance, renter’s insurance, flood insurance, and earthquake insurance. Personal property is usually covered by a homeowners or renter’s policy. The exception is personal property that is very high value and expensive. this is usually covered by purchasing an addition to the policy called a "rider." If there's a claim, the property insurance policy will either reimburse the policyholder for the actual value of the damage or the replacement cost to fix the problem.

Understanding Property Insurance

There are three types of property insurance coverage: replacement cost, actual cash value, and extended replacement costs.

• Replacement cost covers the cost of repairing or replacing property at the same or equal value. The coverage is based on replacement cost values rather than the cash value of items.
• Actual cash value coverage pays the owner or renter the replacement cost minus depreciation. If the destroyed item is 10 years old, you get the value of a 10-year-old item, not a new one.
• Extended replacement costs will pay more than the coverage limit if the costs for construction have gone up; however, this usually won't exceed 25% of the limit. When you buy insurance, the limit is the maximum amount of benefit the insurance company will pay for a given situation or occurrence.