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Insurance - Head Matters


9. Property and Liability Insurance

Property and Liability Insurance offers insurance coverage in the event that the actions or non-actions of an insured result in damage or destruction to another's property. 

Property insurance deals with two types of property in broad categories:  real and personal.  Property insurance protects the property owners at the time of loss. 
  • Real property is defined as land and anything that is growing on it or affixed to it, and the bundle of rights inherent in the ownership.
  • Personal property is defined as anything that is subject to ownership other than real property like your clothing, furniture, cell phone, and other “stuff” that is yours. 
  • Property insurance claims are often settled in one of two ways:  actual cash value and replacement cost. 
  • Actual cash value means that losses will be settled at their value at the time of loss but not in an amount greater than the amount required to repair or replace the property.  So if your computer is stolen and it's worth only about $200 because you’ve had it for a couple years, you will only get $200 or nothing depending on your deductible.
  • With replacement cost reimbursement, no deduction is made for depreciation.  Replacement cost is based on replacement with materials or items of what was lost.
A property loss exposure is the possibility that you will have a property loss resulting from the damaging, destruction, taking, or loss of use of property in which you have a financial interest.

A liability loss reimbursement is based on one of two types of damages: compensatory or punitive.
  • Compensatory damages are designed to financially compensate or reimburse a claimant who has suffered a loss. 
  • Punitive damages are designed to punish a wrongdoer whose conduct has caused another party to suffer a loss.
A liability loss exposure is the possibility of a claim alleging that you are responsible for injury or damage suffered by another party.
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