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Insurance in Damage Actions

Susan Weber
Insurance covers the costs of unexpected damage.

Having insurance in damage actions will minimize or alleviate any financial risk you might have because of damage. Some insurance policies provide coverage for general damage that might be incurred, but you may need more specialized insurance to provide you with maximum coverage.

Who Should Be Insured

If you own property you should have insurance that covers your financial risk if the property is damaged. You could have a major financial loss without insurance. A house fire could cause massive damage which would be costly to repair and could permanently reduce the value of your home. A flood or an earthquake could cause damage to your home or business and could require costly repairs and result in a loss of business revenue.

You could also be responsible for an expensive repair if you cause damage to someone else's property. Your car accident could damage someone else's car and it could also damage property other than their car, such as a tree or house.

Types of Damage Insurance

An insurance policy might include some property damage coverage as a secondary benefit. For example, some travel insurance policies include a limited amount of coverage for luggage damage and camera theft. This coverage may be sufficient if the total financial risk is low. As a general rule, if you have property that would be a major financial risk to replace, you should have specialized insurance with sufficient coverage.

Homeowner's Insurance

Your home is probably your largest asset, so you should be sure that your home and its contents are protected under an "all risk" policy that covers against fire, theft and any type of damage. Many homeowner's insurance policies also provide coverage if your property is lost or stolen, even if the loss happens away from the house - like when your video cam is stolen while you are watching your child's soccer game. Homeowner's insurance can also protect you if non-family members suffer injuries on your property.

Flood Insurance

Homeowner's and business insurance usually does not cover damage caused by floods. Specific flood insurance policies protect homeowners and business owners against losses to the actual buildings and their contents. Flood insurance does not cover flood damage caused to the land.

A flood hazard map will show your property's risk for flooding. If your property is in a high-risk area for floods, a mortgage lender will often require flood insurance to cover at least the amount still owed on the property. For properties outside of the high-risk flood areas, flood insurance is available at a lower cost.

Earthquake Insurance

Earthquake insurance can sometimes be added as an endorsement on a standard homeowner's insurance or business insurance policy. Specific earthquake insurance policies are also available. There is usually a five to fifteen percent deductible, so a homeowner of a home insured at $200,000 would be required to pay $10,000 to $30,000 before the insurance policy would start to pay for any damage. It is important to have coverage for temporary living expenses which will pay for hotels and meals if you and your family need to move out of the home until it is repaired. This is usually no deductible for temporary living expenses.

Earthquake insurance can be expensive. The annual cost is about $1.50 to $3.00 per $1,000 of coverage. For a home in the San Francisco Bay Area, a home valued at $500,000 could have an annual cost of $750 to $1,500 for earthquake insurance. Only about 30 to 40 of homeowners in the San Francisco Bay Area have earthquake insurance.

Renter's Insurance

Renters don't own the building in which they live or run their business, so they don't need homeowner's or property insurance. They probably have valuable assets and belongings inside the building which would be expensive to replace if there was damage to the building because of a fire or other emergency.

Renter's insurance will pay for the replacement or repair of a renter's personal assets. The insurance will also protect the renter from legal liability if someone is injured on the property which they are renting. Renter's insurance is basically like homeowner's insurance, without the coverage for the actual building. Renter's insurance usually costs significantly less than homeowner's insurance.

Property Damage Caused by a Car

Car insurance insures you and your vehicle and property in the vehicle as well as the injuries and property damage caused by the accident. The policy will cover the vehicle you are driving as well as any property you damage with your vehicle or as a result of the accident (such as another vehicle, a fence, the side of a house, etc.) The cost of the insurance depends on the amount of coverage in the policy.

Business Interruption Insurance

Damage on your business property could cause an interruption in your business until the damage is repaired. This interruption could result in lost sales. Business interruption insurance covers the expenses or sales losses incurred from the time of the damage until the damage is repaired or until a maximum amount of time has passed. The cost of the insurance coverage varies. Talk with your insurance broker to see if you can add this type of insurance to your business insurance policy.

Filing a Claim for Insurance in Damage Actions

As with any type of insurance, it is best to immediately file your claim for insurance in damage actions. Filing quickly will let your insurance company know the scope of the damage immediately and get your claim review started and settled quickly. If you delay in filing your claim, you might jeopardize whether the insurance company will pay your claim.

Generally, you should be able to provide the following information when you file your claim:

  • The date and time the damage occurred
  • Where the damage occurred
  • A brief description of what happened
  • A brief description of what was damaged
  • The original cost of the item that was damaged

Once you have provided the initial information, a claim report will be developed. The insurance company may send an inspector to review the damage, take pictures, review any original sales receipts from the purchase of an item and estimate the cost of repair or replacement. The insurance company will expect you to protect the property from any further damage and to prevent anyone or anything from being injured because of the damage.

Insurance in Damage Actions