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Introduction to Residential Property Insurance

TYPES OF POLICIES

Residential property insurance is a term that encompasses several different types of insurance that vary by the kind of dwelling or property you are insuring:

Homeowners

Homeowners insurance provides financial protection in the event that your home is destroyed or damaged due to an unforeseen or catastrophic event. In addition to your home, homeowners insurance also covers your belongings (or personal property) and can reimburse you for medical expenses and liability claims resulting from property damage and personal injury to other people caused by you or members of your family. 

A homeowners policy will also pay for additional living expenses (ALE). ALE will cover your expenses if you are forced to move into a hotel or apartment temporarily because of a covered loss to your home.

Dwelling

Dwelling insurance policies are different from homeowners policies because they do not require the insured property to be owner occupied. Dwelling policies typically cover rental properties but can also be offered to policyholders in instances when the structure does not qualify for the company’s homeowners policy. 

PLEASE NOTE: Dwelling policies cover only the structure and do not provide coverage for personal property contained in the building. 

Dwelling policies do not provide coverage for Additional Living Expenses (ALE). Dwelling policies do not typically offer personal liability coverage either, but this coverage may be added by endorsement in some instances.

Condominium

Condominium policies cover alterations, appliances, fixtures, and improvements that are part of the interior of the condominium unit. Condominium policies can also cover your personal property and can reimburse you for medical expenses and liability claims resulting from property damage and personal injury to other people caused by you or members of your family.

PLEASE NOTE: Condominium policies do not cover loss to the exterior of a structure. 

A condominium policy will also pay for additional living expenses (or ALE). ALE will cover your expenses if you are forced to move into a hotel or apartment temporarily because of a covered loss to your condominium.

Tenant/Renters

Tenant or renters insurance covers personal property inside an apartment or other rented structure.

PLEASE NOTE: Tenant policies do not cover damage to the interior or exterior of a structure. 

Tenant policies will reimburse you for medical expenses and liability claims resulting from property damage and personal injury to other people caused by you or members of your family. A tenant policy will also pay for additional living expenses (ALE).   

Flood

Flood damage is not covered under a typical residential property policy. Most residential property policies define flood to include: surface water, waves, tidal water, storm surge, tsunami, seiche, overflow of a body of water, or spray from any of these.  Flood Insurance can be obtained through FEMA and the National Flood Insurance Program (NFIP). You can access their website HERE.


TYPES OF COVERAGE

There are two ways a residential property policy can cover a loss to your property:

All Risk

All Risk (also called Comprehensive Coverage or open perils coverage)  offers broad protection and covers all perils unless they are specifically excluded by the policy. You should always carefully review the excluded causes of loss section of your policy. Even the most comprehensive policy will exclude certain types of loss (damage caused by flood, for example).

Named Perils

Named Perils (also called Specified Perils Coverage) offers narrower protection than an all risk policy and covers only those perils specifically named under the policy. A policy that offers named perils coverage will also contain exclusions to perils named under the policy. If you are thinking about purchasing a policy that provides named perils coverage only, it is important to make certain that the policy provides coverage for the perils that most concern you.

PLEASE NOTE: It is not uncommon for homeowners policies to provide all risk coverage on the dwelling and named perils coverage for the personal property. Please visit the OPIC Policy Comparison Tool for more information on the types of coverage offered by specific companies.

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CLAIMS SETTLEMENT

Residential property policies also offer different methods of settling your claim and repairing or replacing your property:

Replacement Cost

Replacement Cost coverage pays for all necessary expenses associated with rebuilding or repairing damaged property, up to the policy limits, less any applicable deductible amount.

Actual Cash Value

Actual Cash Value coverage factors in depreciation costs to your claim and pays you the costs to replace or repair the damaged property, less this depreciation and less any applicable deductible amount.

PLEASE NOTE: Most insurance companies that offer replacement cost will initially pay for the loss on an actual cash value basis. The company will pay any additional costs associated with the “replacement cost” once repairs have been made to the property, or the damaged property has been replaced.