Property Insurance

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WEALTH

MANAGEMENT

PROPERTY
INSURANCE
SEMESTER V || PRESENTED BY TYBMS FINANCE (A&B)
INDEX
INTRODUCTION PAGE | 01

TABLE OF CONTENTS
2 Introduction to Property Insurance

3 Types of Property Insurance

5 Inclusions and Exclusions in Commercial Property


Insurance

7 Six types of Commercial Property Insurance

11 Premium Calculator

13 Documentation required for Commercial Property


Insurance

14 Major Companies that provide Commercial Property


Insurance (in USA & India)

16 Case Study #1 - The Case Of Jeffrey Alnutt (USA)

Case Study #2 - The Case Of Two Directors of SRS


18 Meditech (India)

20 Team Members
INTRODUCTION
INTRODUCTION PAGE | 02

Property insurance, as the name suggests, provides


protection against most risks to property, such as fire, theft
and some weather damage. This includes specialized forms
of insurance such as fire insurance, flood
insurance, earthquake insurance, home insurance, or boiler
insurance, etc.

Property insurance is a broad term for a series of policies that


provide either property protection coverage or liability
coverage.

It provides financial reimbursement to the owner or renter of


a structure, and its contents in case there is damage or theft,
and to a person other than the owner or renter, if that person
is injured on the property.

The property insurance is considered as an umbrella or


package cover that offers a combination of covers under a
single name.

Property is insured in 2 main ways—

A. Open perils : cover all the causes of loss not specifically


excluded in the policy. (damage resulting
from earthquakes, floods, nuclear incidents, acts of terrorism,
and war).

B. Named perils : require the actual cause of loss to be listed


in the policy for insurance to be provided. (specified damage-
causing events as such fire, lightning, explosion, and theft.)
Key Takeaways
Property insurance refers to a series of policies that offer
either property protection or liability coverage.

Property insurance can include homeowners insurance,


renters insurance, flood insurance, and earthquake
insurance, commercial property insurance among other
policies.

The three types of property insurance coverage include


replacement cost, actual cash value, and extended
replacement costs.
TYPES OF
INTRODUCTION PAGE | 03
PROPERTY INSURANCE

There are two main broad categories of Property Insurance that are provided by
leading insurance companies

I. HOME-OWNER'S INSURANCE
Homeowners insurance is a form of property insurance that
covers losses and damages to an individual's house and to
assets in the home. It also provides liability coverage against
accidents in the home or on the property.

There are two types of home insurance policies—


A. Fire Insurance Policy (FIP) covers your house against fire
and other allied perils including lightening, storm, flood and
riot. However, some insurers may ask you to pay an extra
premium in order to cover disasters such as earthquake and
landslides. You can also insure your house and contents
against terrorism by buying an add-on cover.

B. Householder's Package Policy (HPP) on the other hand


packs in more covers. The basic cover bifurcates into two: one
covers the structure of the building against fire and other
allied perils and the second covers the contents of the house.
Tenants can just opt for cover for just the contents. A HPP also
offers optional covers that insure contents of your house
against burglary, damage, mechanical or electrical
breakdown.

KEY TAKEAWAYS

Homeowner's insurance is a form of property insurance


that covers losses and damages to an individual's house
and to assets in the home. 
The policy usually covers interior damage, exterior damage,
loss or damage of personal assets, and injury that arises
while on the property.
Acts of war or acts of God are typically excluded from
standard homeowners insurance policies.
Homeowner's insurance policy is different from a home
warranty and mortgage insurance.
TYPES OF
INTRODUCTION PAGE | 04
PROPERTY INSURANCE

II. COMMERCIAL PROPERTY INSURANCE


Business property insurance is something every company
needs – whether you own your own building, lease or work
from home.

A Business-Owner's Policy (BOP), combines various insurance


coverages – such as commercial property insurance, general
liability and business income – into one convenient policy.

Commercial Property Insurance is one of the core coverages in


a BOP, and it protects your building and its contents, as well as
exterior fixtures, such as a fence or outdoor sign, from such
perils as fire, theft and natural disaster.

It also helps protect the value of the physical assets your


business owns.

Usually, a Commercial Property Insurance covers numerous


risks, and on the basis of their coverage, it is feasible to divide
the policy under the following categories :

A. Basic Policy: It comprises of common perils like lightning,


fire, civil commotion, etc.

B. Broad Policy: Along with basic perils, it covers other perils as


well risks, like collapse, breakage of glass, water damage,
sprinkler leakage, etc.

C. Special form Policy: It covers all types of risks except those


which a commercial property insurance specifically excludes
from the insurance document. Some of the events which are
not covered under the policy are terrorism, war, wear & tear,
nuclear disaster, consequential losses, nuclear perils, fines or
penalties, etc.

Our report focuses on the Commercial Property Insurance


policies.

The above details regarding the Commercial property insurance's coverage will be
discussed in detail further in the report.
INCLUSIONS
POLICY COVERAGE PAGE | 05
& EXLUSIONS

WHAT RISKS DOES A COMMERCIAL


PROPERTY INSURANCE COVER?
Perils covered by property insurance typically include select
weather-related afflictions, including damage caused by fire,
smoke, wind, hail, the impact of snow and ice, lightning, and
more.

Property insurance also protects against vandalism and theft,


covering the structure and its contents. It also provides liability
coverage in case someone other than the property owner or
renter (eg : workman's compensation) is injured while on the
property and decides to sue.

The policy also covers :

The breakdown of equipment/machinery due to internal


reasons such as sudden breaking of parts, electrical short-
circuit, etc.

Loss, damage or destruction to portable electronic items


such as laptops, palmtops, mobile phones, projectors etc.

Loss or damage to accompanied personal baggage of the


Insured person (employee) due to fire, riot & strike, terrorist
activity, theft or accident during any time during the policy
period while travelling on official tour

Expenses incurred due to sudden and unforeseen


accidental, electrical and mechanical breakdown to
machinery is also covered under the policy. (The cover
operates when the insured property is at work or at rest or
being dismantled for the purpose of cleaning/overhauling
and subsequent re-erection at the same premises.)

Liabilities to the Third Parties in respect of Accidental Death


or Accidental Bodily Injury or Accidental Property Damage,
arising out of the business activities of the insured
INCLUSIONS
POLICY COVERAGE PAGE | 06
& EXLUSIONS

Loss of cash in transit, cash in safe & cash in counter.

Loss of money or goods caused by fraud or dishonesty of


employees.

Loss or damage to installation of glow signs, neon signs


against any accidental external means, fire, theft, or
external explosion.

Some policies provided by leading insurance companies in


India tend to exclude:

Shops those who deal in hazardous goods such as


explosives (including Arms & Ammunitions), Fire
crackers, matches, flammable liquids (including Petrol
Bunks) & paints, Fibres of all origin(such as jute, coir, hay,
straw etc), Timber or wood works, films (including
cinema films), Jewelry, Art, curios, antique, textile or
garment showrooms / shops, Furniture shops.

Transporters godown, standalone godowns storing


hazardous goods, godowns storing multiple items
belonging to different entities.

Financial Institutions such as Bank, Pawn Broker


including Profession cash carriers.

Amusement Arcades / Betting Shops / Casinos.Cold


Storages.

Declined Locations:
Andaman & Nicobar Island, Lakshadweep, NE States,
Jammu & Kashmir, Specified districts in Himachal
Pradesh.

The next few pages will introduce you to the various types of commercial
property insurance, what is covered and by whom are such polcies generally
used by.
TYPES OF
COMMERCIAL PROPERTY PAGE | 07
PROPERTY INSURANCE

1. DIRECT DAMAGE PROPERTY INSURANCE


This type of insurance covers loss or damage to physical
property by a covered cause of loss.

Catastrophic events are not always automatically covered,


such as those resulting from a natural disaster like a
tornado or hurricane,

Separate insurance might also be necessary to cover


cleanup and debris removal from property after a natural
disaster, even if your insurance covers rebuilding or
replacement.

2. PURCHASING DIRECT DAMAGE COVERAGE

Most businesses obtain direct damage coverage by


purchasing a commercial property policy that covers loss or
damage to business-owned property, such as buildings,
production machinery, office equipment, furniture, and
stock.

It also provides some coverage for loss or damage to


property owned by someone else that a company uses in its
business, such as a copy machine that's leased from an
office supply store.

'Most homeowners polices don't cover coverages hence is


insurance becomes vital, if one works from home or store
products or equipment there.

3. TIME ELEMENT COVERAGES


Another category of commercial property insurance
consists of time element coverages. Losses are tied to the
period of time it takes to repair damaged property.

Losses grow as the time required to make repairs


increases.
TYPES OF
COMMERCIAL PROPERTY PAGE | 08
PROPERTY INSURANCE

Business income coverage covers income your company


loses when your business is forced to shut down due to
damage to physical property caused by a covered peril.

Extra expense coverage covers expenses you might incur


to avoid or minimize a shutdown of your business after
your property has sustained a physical loss.

Leasehold interest coverage covers a financial loss you


sustain when your lease is cancelled due to direct physical
loss or damage to property at your premises.

Time element coverages are usually written in conjunction


with direct damage insurance. Any of these coverages can
be added to a commercial property policy.

4. INLAND MARINE INSURANCE


They're often referred to as floaters because inland marine
policies cover movable property.

These policies afford little coverage for property located


elsewhere, but many businesses own equipment that they
use at off-site locations.
For example, most tree trimming companies own ladders,
saws, wood chippers, and other equipment that they
transport to customers' premises.

There are many types of inland marine coverages. Most can


be added to a commercial property or package policy via a
separate form or endorsement

.As the name suggests, fine arts coverage covers loss or


damage to statuary, paintings, carvings, and other valuable
works of art owned by businesses.

Contractors equipment coverage addresses loss or


damage to tools, machinery, or other mobile
equipment owned or used by contractors..
TYPES OF
COMMERCIAL PROPERTY PAGE | 09
PROPERTY INSURANCE

Accounts receivable coverage protects your business


against losses caused by your inability to collect sums
owed to you by customers due to damage to your
accounts receivable records.

Inland transit coverage covers loss or damage to goods


transported over land within the United States. Most
goods covered by inland transit policies are shipped by
rail, truck, or a combination of the two.

Electronic data processing (EDP) coverage protects your


business from loss or damage to your computers, data, or
storage media. EDP coverage is important if your
company is heavily dependent on computers to carry out
its day-to-day operations. 

Cyber liability insurance against damages caused by your


own electronic data or website, such as if your system is
hacked.

An installation floater covers damage to property, such as


a boiler, that you intend to install at a customer's location.
Coverage applies while the property is in transit to or from
the job site, and while it is awaiting installation at the
customer's location.

An exhibition floater covers damage to property being


displayed at a trade show or exhibition. It also covers the
property while in transit to or from the exhibition site

5. CRIME INSURANCE
Businesses can purchase crime insurance to protect
themselves against thefts committed by employees. They
also include loss or damage to money or securities by any
cause.

There are three types of Crime Insurance coverage for


businessess to avail of :
TYPES OF
COMMERCIAL PROPERTY PAGE | 10
PROPERTY INSURANCE

Employee theft coverage protects businesses against the


theft of money, securities, and other property by
employees.

Computer fraud coverage protects businesses against


theft of property by a thief who commits the crime using a
computer, and,

Money and Securities coverage covers the loss of money


and securities if the loss takes place inside your premises
or a banking institution, or outside your premises.

6. BUILDER'S RISK INSURANCE

Property and BOP policies are designed to cover completed


buildings.

They provide little or no coverage for new buildings that are


under construction.

One would purchase builders risk insurance to insure


buildings during the construction process.

Builders risk is a type of inland marine insurance. Unlike


most inland marine coverages, however, builders risk is
generally written by itself.

A builders risk policy begins when construction starts and


ends when the project is completed.The policy is typically
purchased by the general contractor or project owner.

It protects all parties involved in the project against physical


damage to insured property caused by a covered peril.

Insured parties typically include the owner, the general


contractor, and all subcontractors.
PREMIUM CALCULATOR
PREMIUM CALCULATOR PAGE | 11

Insurance companies take the basic information that we provide to them to


calculate the risk of loss for our business. The higher risk our business is rated,
the higher the premiums will be.
FACTORS CONSIDERED FOR CALCULATION OF
PREMIUM FOR PROPERTY INSURANCE
Location: Buildings in cities or towns with excellent fire
protection and strong security systems typically cost less
to insure than buildings outside a city or in areas with
limited fire protection.

Construction: Buildings made of potentially combustible


materials will have higher premiums, while those made of
fire-resistant materials could earn a discount. Additions to
an existing structure might affect a fire rating, so it's a
good idea to talk to an agent or insurance company
before remodeling. Internal structural elements can also
change a fire rating. Using wood partitions, floors, and
stairways in an otherwise fire-resistant building will likely
nullify any rate reduction. Fire-resistant interior walls,
floors, and doors can help maintain a good fire rating.

Occupancy: A building's use also affects its fire rating. An


office building will likely rate better than a restaurant or
auto repair shop. In a building with multiple tenants, one
hazardous occupant will negatively affect the fire rating of
the entire building. If a business is in a building with a
more hazardous tenant, premiums will be higher.

Type of Industry:The insurance company will also


consider the industry when determining business’s
insurance premiums. For instance, for businesses in the
construction industry the rates will likely be higher due to
the inherent liability risks that come from working in
construction. On the plus side, for industry such as retail,
rates might be on the lower side.
Claim History: One's insurance history also determines
insurance rates. If a company has filed several claims
throughout the years, the premiums will be on the higher
side (as one has proven to be at higher risk in the past).
PREMIUMCALCULATOR
PREMIUM CALCULATOR PAGE | 12

In case of Commercial Property Insurance, Total insurable


value plays a vital role in premium calculator

Total insurable value is a property insurance term referring to


the sum of the full replacement costvalue of the insured’s
covered property, business income values, and any other
insured property.

A total insurable value (TIV) is calculated by adding together


the total property, equipment, inventory, tools, etc. at each
location and combining it with a the final number calculated
on a fully completed business income worksheet.  

A business income worksheet is a form that is provided by


your insurance broker that is used to estimate an
organization’s annual business income for the upcoming 12-
month period, for purposes of selecting a business income
limit of insurance.

The selected percentage, or multiple, of the organization’s


estimated annual business income for the upcoming 12-
month period should be based on how long it would take to
replace all damaged property and resume operations in the
event of a worst-case loss.

For some organizations, this period could exceed 12 months.


Most insurers require a completed business income worksheet
as a condition of activating the business income agreed value
coverage option.

The total insurable value (TIV) is an important number for


all commercial property policies because it is typically the
number that is applied against the rate to determine the
premium.
REQUIREMENTS
REQUIREMENTS PAGE | 13

REQUIREMENTS FOR GETTING THE INSURANCE


#1 The person who is willing to take a property insurance
policy should have a financial interest (insurable interest) in
the asset that needs to be insured. So, the person will be at a
loss financially if any event causes damage to his asset.

#2 The person must submit a proposal form with a


general insurance company. All the necessary details should be
filled in the proposal form,

The person must include a list of basic requirements


need by the insurance company such as:

Building basics Fences, landscaping, signs,


or other outdoor
Location equipment

Construction type (brick or Fixtures or improvements


wood frame) to the building

Number of floors and Fire alarms, sprinkler


windows systems, fire extinguishers

Office equipment Equipment such as


including tools, computers appliances or
or furniture, including manufacturing equipment
leased equipment
Employee record
Age of electrical and Inventory
heating systems, and age
of roof

If the person already has insurance, one ought to provide


a copy of the declaration page of current policy.

After verification of all the details mentioned in the


proposal form and payment of the initial premium, the
insurer shall issue the policy to the proposer.

But, the primary requirement for availing the policy is regular payment of
premium to keep the property protected against potential losses.
MAJOR COMPANIES
COMPANIES PAGE | 14

MAJOR COMPANIES PROVIDING PROPERTY


INSURANCE
1. The Hartford
The Hartford is one of the largest carriers of commercial
insurance in the nation, having served consumers and
business owners for more than 200 years.

It has a wide appetite for business risk, meaning it covers


many industries and business sizes. Lessors risk real estate
policies are one of the top types of business insurance policies
they write. The Hartford is the perfect choice for a business
that wants commercial property insurance as a standalone
policy or as part of a business owners policy (BOP).

In both cases, The Hartford offers coverage in competitively


priced packages. The Hartford prefers buildings less
than 50 years old, but will often take additional steps to meet
clients’insurance needs for older properties.

2. Travelers Group
Travelers Group is a major commercial lines insurance carrier
that often receives the highest ratings from insurance credit
companies. Business owners who purchase insurance from
Travelers Group gain a business partner seeking to help
mitigate losses through safety and security programs offered
for long-term savings.

Travelers Group is a great choice for commercial real estate


investors who have multiple properties.

While Travelers preference is for real estate portfolios capped at


$50 million in market value, the company is able to underwrite
larger classes of real estate with some additional underwriting.

3. Hiscox
Although Hiscox is a younger company, they remain financially
strong through smart underwriting risk selection of company
sizes and industries.

Hiscox is a great option for small residential unit and


apartment building managers that need both structure and
liability coverage.
COMPANIES
MAJOR COMPANIES PAGE | 15

4. Insurance321
Insurance321 is a broker that helps small business owners shop
the rates and policy inclusions among the top insurance
carriers. This not only saves time for the business
owner, but also helps to make sure that the right carrier is
paired to the right risk.

Insurance321 is the perfect choice for a small business owner


who wants to compare carriers to make
sure the right one is selected and the best price is achieved.

Since Insurance321 isn’t beholden to any one carrier, they offer


objective advice for the best policies for business owners.

IN INDIA
CitiBank
CitiBank offers comprehensive insurance solutions for Indian
families and businesses. These economical Insurance plans
include Life Insurance, Health and Accident Insurance, Travel
Insurance, Property Insurance, and Insurance for Loans taken by
businesses.

CitiBank helps businesses secure their investments before it's


too late. With various policies, one can insure their trips,
properties and employees with a range of Non Life Insurance
policies brought to you by Citibank..
PAGE | 16 CASE
C A S E STUDY
STUDY

#1 - THE CASE OF JEFFREY ALNUTT (USA)

Debra Morris dashed back into the flaming house, trying to rescue her cat. But the
second-floor tenant never made it back out. Morris perished in the voracious smoke
and flames that devoured the structure. 

The building’s owner Jeffrey Alnutt had set the place afire, hoping to steal a
$277,000 insurance payday to bail himself out of crushing debt and failed
business ventures in the Johnstown, N.Y. area.

"Someone set the fire as revenge because he was a drug informant for local police",
Alnutt contended.But the court didn’t buy his story. The case against Alnutt was
largely circumstantial, but was convincingly pieced together by investigators and
prosecutors.

EVIDENCE PILED UP

A trained arson dog found gasoline in the rubble where Alnutt had poured and
ignited gasoline. The blaze started in the enclosed porch, where the searing flames
burned a large hole in the center of the porch floor. A gasoline can also was found
melted to the floor.

ARSONIST STOKES
FLAMES OF GREED
PAGE | 17 C A S E STUDY
CASE STUDY

A witness saw Alnutt carrying what looked like the offending gas can onto the porch
before the fire broke out. Another witness saw Alnutt carrying personal belongings
from the building before the blaze. An old dryer connected to a natural gas line on
the porch could’ve started the blaze, Alnutt argued at his trial.

But investigators found nothing that could’ve started a natural or accidental fire.

 Alnutt had plenty of motives to score insurance money. His varied businesses were
failing because he spent too much time with his girlfriend, testified his ex-wife, who
also was his business partner and accountant. At one point, they owned seven
buildings but couldn’t cover the mortgages. The annual income of his vocational
rehab business also had fallen from nearly $720,000 to under $300,000 in just one
year.

SHOWED NO REMORSE

Nor was Alnutt a stranger to insurance-driven arson schemes. He already was


serving 15 years in prison for torching another of his buildings for insurance
money. Alnutt received 25 years to life in prison for his murderous arson.

The New York frauds bureau played a lead role in the investigation, calling the
conviction one of the most significant in the unit’s history

.But Alnutt showed no remorse. Instead, he arguing with the judge why the
sentence should be overturned.

The judge recounted a conversation Alnutt had had with Morris’ boyfriend Gary
Romaine after the tragic fire. Romaine was grieving her loss. “‘You said, ‘Well,
you know I lost some furniture and antiques too’” the judge reminded Alnutt.
“That said a lot about the insight into your mindset and your character...”

ARSONIST STOKES
FLAMES OF GREED
PAGE | 18 CASE
C A S E STUDY
STUDY

#2 THE CASE OF DIRECTORS OF MIDITECH (INDIA)


Two directors of a company had been arrested by the Surajpur police for burning
down their own factory to claim insurance to the tune of Rs 70 crore.

Two workers, who had helped the suspects start the fire, had lost their lives in the
incident and the body of one of the deceased is yet to be recovered. The arrested
persons have been identified as Sayed Mujahir Askari, a resident of Sector 44, and
Singhraj, a resident of Delta-1, Greater Noida.

According to the police, the two were directors of SRS Meditech, Greater Noida, and
had taken the factory on rent from SK Gupta, a resident of Delhi, since 2010. The
accused had insured their factory for Rs 70 crore.

The suspects had stopped paying the rent to Gupta over the last few years. Police
said the suspects have rental dues of around Rs 1 crore and pending electricity
bills of around Rs 1.45 crore.

EVIDENCE PILED UP

Gupta got suspicious of the incident and lodged a complaint with the Greater
Noida police

TALE OF TWO DIRECTORS


PAGE | 19 CASE
C A S E STUDY
STUDY

During the investigation, police came to know that the machinery was not present on
the premises when the factory went up in flames.

The police also found out that the suspects had tried to set the factory on fire twice
before the incident on October 28.

In the previous attempts, the suspects managed to claim Rs 9 crore as insurance. The
second claim of Rs 22 crore was denied by the company.“The accused burnt the
factory multiple times to claim huge sums of insurance money. On the third instance,
when the factory was gutted, Gupta got suspicious and lodged a complaint.

He also took the help of the Mumbai-based insurance firm to investigate the matter,”
Munish Chauhan, station house officer, Surajpur, said.

During the investigation, police and Gupta’s investigation firm found out that the
cause of the fire on October 28 was chemicals and not a short-circuit.

“The accused had claimed that the fire started because of a short-circuit but during
the investigation, it was found that chemicals were used to burn the factory. We are
now trying to find out the exact dates of the previous fire incidents at SRS Meditech,”
Chauhan said.

THIRD TIME'S A (NO) CHARM


Police said two workers also lost their lives in the blaze. “They died while in the fire
they helped start."

The body of one worker, Noor Hasan alias Noorie, is yet to be found. The body of
second worker, Mahsar Ali alias Kausar, was taken to his native place near Bareilly
by the suspects and buried. Both the victims belonged to the same village.

The accused have been booked under sections 420 (cheating), 341 (wrongful
restraint), 436 (mischief by fire ), 504 (intentional insult), 506 (criminal
intimidation), 365 (abduction), 304a (death by negligence) and 120b (criminal
conspiracy) of the Indian Penal Code.

TALE OF TWO DIRECTORS


PAGE | 20 TEAM MEMBERS
CASE STUDY

08 38
VANSHIKA NATASHA
ARORA HINDUJA

62 73
BHAVNA SIMRAN
LAKHANI MANGTANI

78 110
KAUSHAL  PRANAV
MEHTA SATHISH

TEAM MEMBERS

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