Explaining the details in property insurance

CHUKWUMA ONONIWU

Chukwuma Ononiwu (FCILRM, Nig; FICRMP, U.K.), an alumnus of Abia State University and Lagos Business School Pan Atlantic University, is a consummate insurance broker, seasoned insurance consultant and digital insurance advocate. He can be reached on: riskswisepro@gmail.com and +234-903-596-8732 (text only).

PROPERTY INSURANCE: A property insurance policy provides compensation for damage, for loss by fire, for loss by theft/burglary/larceny, for loss by vandalisation, for loss by malicious damage, etc. It equally pays compensation to third parties injured in the property. The property owner’s liability section of the policy protects landlords and  property owners, in respect of claims made against them in respect of their legal liability for personal injury and or property damage, suffered by third parties, arising from the policy holder’s ownership of the property. 

The types of property insurance, include but not limited to: building insurance policy; home insurance policy; renters insurance policy; flood insurance policy; etc.

The scope of cover in a property insurance policy are: cover for fire and allied perils; cover for buildings; cover for contents of the buildings; cover for explosion of gas; cover for bursting and overflowing of water tanks/pipes; cover for damage caused by aircrafts; cover for earthquake; cover for flood; cover for burglary/theft/housebreaking/larceny; cover for public liability; cover for public liability; cover for personal accident, etc. 

The exclusions in a property insurance are: Damage/loss as a consequence of war; damage/loss as a consequence of confiscation; damage/loss as a consequence of oxidation; damage/loss as a consequence of environmental pollution; damage/loss caused by depreciation; damage/loss caused by wear and tear; damage/loss caused by arson, etc. 

The key peculiarities of a property insurance are as follows: It cannot be ASSIGNED; it has no SURRENDER VALUE; it is not a DECLARATION  POLICY; the premium is a critical factor of the location of the risk/the risk safety improvement measures/the degree of risk and the frequency of occurrence of risk of damage/loss/fire/vandalisation. 

Property insurance is governed by the six cardinal principles of insurance: Insurable interest; Utmost good faith; Proximate cause; Indemnity; Subrogation; and Contribution. A corollary is LOSS MINIMISATION and the insurer’s right of SALVAGE, if any, having paid the claim due, in the first place. 

CLAIM PAYMENT: The four types of claim payment are: replacement cost, reinstatement cost, extended replacement cost, and actual cash value. There is a need to distinguish a property insurance policy from a pecuniary insurance. A pecuniary insurance policy covers businesses against purely financial losses. For example: from fraud; from legal expenses; from business interruption, financial losses, etc, rather than from physical damage to a property. 

In the same vein, there is a need to distinguish a pecuniary insurance policy from a fidelity guaranty insurance policy. A fidelity guaranty insurance policy protects an organisation against loss of money or valuables, etc, as a result of dishonesty, forgery, theft, fraudulent activity(ies) of employees.

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