What Is Property Insurance(All you need to know)

You must have been hearing of property insurance and you might be wondering how the property insurance works. If you’re here to learn more about property insurance, you’re in the right place. In today’s article, we’re going to discuss what you need to know about property insurance. Without wasting much time, let us dive into today’s discussion.

What Is Property Insurance?

The term property insurance is a comprehensive term for a series of policies that provides property protection coverage or liability coverage specifically for property owners. This property protection covers many things, such as financial reimbursement for property owners or tenants who rented the property. A good example of this property insurance is homeowners insurance, renters insurance, and flood insurance policies. These policies can provide coverage for damages caused by fire, flooding, theft, weather, and other risks.

In the case of personal high valued and expensive properties, there are usually exceptions for such properties. These kinds of properties are usually covered by purchasing an addition to the policy called a “RIDER”. If for any reason there is 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.

What Is Property Insurance?

How Property Insurance All Started(History)

According to Wikipedia. Property Insurance can be dated or traced back to the 1666 fire incident that happened in London which was referred to as the “Great Fire of London”. During that fire incident, more than 13,000 houses were destroyed.

The fire incident brought about some major changes such as turning the matter of insurance from a thing of convenience into a thing of urgency.

Sir. Christopher Wren made an arrangement for a site to be used as an insurance office in his new plan for London in 1667, this brought about different attempts to establish an insurance scheme but that came to nothing.

Around 1681, an economist known as Nicholas Barbon and other eleven associates went ahead to establish the first fire insurance company which they named the “Insurance Office for Houses” at the back of the Royal Exchange to insure brick and frame homes. Initially, 5,000 homes were insured by Barbon’s Insurance Office.

This company brought about the rise and existence of other similar companies. Most of these companies employed their own fire department teams to help prevent and minimize the damages from conflagrations on properties insured by them. And also, they introduce the “Fire Insurance Marks” which they issued to their customers.

With the fire insurance mark, a customer will display it prominently above the main door of his house in other for them to easily identify their customers. A notable company known for that was the “Hand in Hand Fire & Life Insurance Society”, founded in 1696 at Tom’s Coffee House in St Martin’s Lane in London.

In 1710, the “Sun Fire Office” was recorded as the first property insurance company which later changed into the RSA Insurance group through different mergers and acquisitions over the years.

The insurance of properties from disasters was later popularized by Benjamin Franklin in the colonial America Era. He was able to help in creating a standard of practice in the insurance industry. He went ahead and founded the Philadelphia Contributionshp for the Insurance of Houses from Loss by fire. Franklin’s company refused to insure certain buildings, such as wooden houses, where the risk of fire was too great.

How Property Insurance Works

Property Insurance covers both natural disasters and man-made disasters. When a disaster happens as a result of fire incidents, smoke, wind, snow and ice, lightning, vandalism, theft, and many more. Property Insurance covers all of the disasters I mentioned above but it all depends on the company offering such insurance.

Property insurance also provides liability coverage in special cases like situations where someone other than the property owner or renter is injured while on the property and decides to sue.

In most cases, property insurance policies normally exclude damages that occur to one’s property as a result of tsunamis, floods, drain and sewer backups, seeping groundwater, standing water, and a number of other sources of water.

Most insurance companies’ policies do not usually cover extreme damages as a result of nuclear events, acts of war, or terrorism.

What You Need To Understand By Property Insurance.

When we talk about property insurance, it is very important that we focus on the three(3) major types of property insurance coverage. These insurance are replacement cost, actual cash value, and extended replacement cost.

Replacement cost

As the name implies, it has to do with the repairs or replacement of property at the same or equal value. This covers how much it will cost overall to replace the damaged property rather than the cash value of the item.

Cash Value

This coverage has to do with the insurance company paying the owner or renter of the property the replacement cost minus depreciation. If for instance, the affected property or item is 5 years old, you as the owner will get the value of a 5-year-old item, not a new one.

Extended Replacement Cost
This coverage has to do with you as the owner getting more than the coverage limit if the costs for construction have gone up. But in many cases, this does not 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.

Types Of Property Insurance

There are different types of property insurance. These types of insurance are;

  • Homeowners Insurance
  • Rental Insurance
  • Condo/Co-Op Insurance
  • Landlord Insurance

Homeowners Insurance

Home Insurance is a premium coverage that protects the structure of your home and other belongings inside against loss or damages caused by either natural or man made disaster so long as it is covered. This insurance covers more than just the house it self. With the right coverage, you can relace everything such as furnitures, appliances, clothings and more.

Rental Insurance

The Rental Insurance is a coverage which is designed to protect the the properties you’ve work hard on as a property owner. This covers your possesions from theft or damages. This insurance provide liability protection, and reimburses additional living expenses. This protection pays for third party damage claims made against you by others as the property owner.
It is very important to know that Rentals insurance doesn’t pay the cost to repair the building or its structure—your landlord’s insurance should cover that.

Condo/Co-Op Insurance

This is another type of Insurance policy that covers you, your propety, and your entire condo unit. This include yhe outer walls and inwards of the structure. This also provides liability coverage just in case you’re sued for harm caused to others.

Landloard Insurance

As an owner of multiple rental properties, this type of insurance is best for you. The landlord insurance covers different kind of risk you may face as a result of letting or leasing out your property which standard home insurance may not cover. This covers both damages to your buildings or to your contents against different perils such as floods, fire, and many more.

The Cost For Property Insurance

The cost of property insurance is determined by so many factors. This cost will be determined by your issuer after assessing the property. This must pass through the underwriting process to ascertain the value and what rate to charge.

These underwriting rules are dynamic and differ among different issuers. That is why it is advisable to do your own research before taking on any insurance. You might see an issuer willing and ready to sell you a policy while another is not.

Below are some of the major factors that determine or affect the cost of property insurance

The material used for the construction of the property

When your property is made of cheaper materials such as bricks and stones, you’ll be paying a lower premium compared to a property made of woods and other expensive materials.

Location Of Residence

Your location of residence is very important when it comes to insurance. When you live in a location prone to floods, earthquakes, and other natural disasters, you’ll be paying more premiums.

Property Age and Condition
Buildings that are old or considered dilapidated might be rejected by some insurance companies because they’re not ready to run at a loss. Only a few of them will consider you, but know that you’ll be paying a higher premium.

Credit Score

In most cases, you won’t be rejected by an insurance company because of your credit score rating. But you can score lower premium rates if you have a good credit score.

Eligibility Requirement For Property Insurance

The insurance of property is widely available to both individuals and businesses in the insurance marketplace.

For you to get insurance from any insurance company, you or your business must fulfill the insurer’s underwriting requirements, which are the combinations of facts about you, your property, or your business.

Any property owner with track records of frequent property loss or damage may not be able to qualify for any premium coverage, or in some cases may pay extra for it.

Who Should Consider an Insurance?

The insurance of property is very important for the protection of high-valued properties. Nearly every business or property owner should have insurance coverage as it is very important.


You don’t just get the property fixed by insurance companies because they are under insurance. Kindly note that none of these coverage levels reimburses the homeowner for a property that breaks down or is damaged in more normal wear-and-tear situations, such as a roof that begins to leak without damage from wind and hail. That’s where home warranties—another way to protect your property—can be helpful.

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For any questions or inquiries, you can drop them in the comment section. We’ll be happy to answer them.

Also Read: Cheap Car Insurance For Drivers Under 25 In 2022

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