Property Damage: What You Should Know

There are two types of property damage that you need to be insured against: damage that is done to your own property by a third party or some uncontrollable force and damage that you may do to someone else’s property. In either circumstance, adequate insurance coverage can save you from financial catastrophe.

Auto Insurance and Property Damage

The parts of an automobile insurance policy that deal with damage to your own vehicle are collision and comprehensive coverage. Collision coverage protects the policyholder in case his or her vehicle collides with another vehicle or object. This is the case even if the policyholder caused the accident. Comprehensive coverage protects the policyholder in case the vehicle is destroyed or damaged by circumstances apart from a collision. These circumstances include: theft, fire, vandalism, damage from a fallen tree and other acts of nature. The premiums for this type of insurance are hefty and the policy will most likely require some sort of deductible. Make sure to talk to several insurance brokers and ask about all available policies before making a final decision.

While collision and comprehensive coverage protect the policyholder’s vehicle, the personal property liability portion of an insurance policy covers the vehicle and personal property of a third party. There are usually state minimums for this sort of coverage, but they are rarely enough to financially protect the policyholder in the case of serious property damage.

Homeowner’s Insurance and Property Damage

If you start thinking about protecting yourself against property damage to your home and its contents only after the damage has occurred, then you might just be too late. An adequate response to property damage requires pre-planning and vigilance on the part of the homeowner. If policies kept aren’t up-to-date and preparations made before damage occurs then the financial fallout could be severe.

When you first purchase your home you should sit down with your broker and go over all aspects of your homeowner’s insurance policy. Insurance can be a pretty mundane subject, but it’s important that you understand your policy. Don’t be afraid to ask questions. It’s your home and property that is being protected. A typical homeowner’s policy will cover the house and any building attached to it, detached buildings, plumbing, all electrical wiring, air conditioning, built-in appliances, personal property within the home and living expenses should you have to evacuate your home while it’s being repaired. The basic coverage doesn’t protect everything in your home, so you may need to add to your existing insurance if you want to increase coverage or include additional items.

It seems like everything associated with owning a home is expensive and, as a result, it can be incredibly easy for a homeowner to rationalize doing without specific types of homeowner’s insurance. The reality is that you never know what’s going to happen and should acquire all the insurance coverage you can afford. For example, most people are not aware of how common floods actually are, even out of designated flood zones. So, it would be very simple for a homeowner living outside a flood zone to convince he or herself that flood insurance is unnecessary. This is a mistake. If there is even the slightest chance that your home could be affected by floodwaters, you need flood insurance. Your regular homeowner’s policy won’t cover flood damage and federal assistance isn’t made available unless the area is declared a federal disaster.

Once you have your policies in place, make sure to keep the coverage limits up to date. Find out what local home values and re-building costs are in your area and make sure that the coverage in your policy is commensurate with those values. You should also reevaluate your personal property – the contents of the home - on a regular basis and increase coverage limits if necessary. Keep an updated photo inventory of your personal property (along with any relevant appraisal records) at a location other than your home. You might want to keep a copy of your homeowner’s policies and your agent’s contact information at this location as well.

Renters can also experience devastating property damage and some may not realize that the homeowner’s policy will not cover the renter’s personal property. This is why carrying an adequate amount of renter’s insurance is so very important.