Real Property Insurance Explained | Propertylogy

Real Property Insurance

By on May 20, 2019

When buying home-related insurance policies, there is always a distinction between real property and personal property being made.

Even though the average person would associate the term property with their houses, there is a requirement to be clear in language with regards to the law.

And as insurers are notorious for referencing wordings and terms for denying claims or claiming limited coverage, you’d expect no less from them when it comes to the coverage of something as high valued as real estate.


What is real property?

Real property refers to real physical that is attached to the land which cannot be moved.

It can refer to:

  • Structures
  • Houses
  • Buildings
  • Machinery
  • Bridges
  • Pools
  • Crops
  • Roads
  • etc

There is a need to differentiate between real and personal property insurance as some insurance policies cover one or the other.

If the word property is left up to discretion, then policies could be a huge target for unethical people to abuse.

Homeowners could start making claims for losses in personal property like furniture and electrical appliances when a policy is only meant to cover damages to real property.

Types of real property insured

There are generally three categories of real property that insurers underwrite policies for.

  1. Commercial property
  2. Industrial property
  3. Residential property

These types of property are usually covered for perils such as fire, damage caused by accidents, damages from natural causes, short-circuits, etc.

However, to get insured for natural disasters, landowners might have to purchase riders or other types of policies for coverage.

Some of the natural disasters that general policies typically do not cover are floods, landslides, earthquakes, sinkholes, etc.

When there are no policies that insure businesses and homeowners from such losses, they are sometimes recommended to purchase liability insurance to fill up the coverage gaps.

Making the best case for your claims for real property

If you’ve never had a run-in with an insurer who tried to deny or limit the amount of claims which you were entitled to, you are one lucky fellow.

But you luck would eventually run out.

I once tried to make a claim for a roof that was damaged by a heavy storm. The leaks caused water damage to many parts of the house.

I went to an appointed contractor by the insurer and reported for repairs and claims. Everything was going along fine until a few day later when an officer from the insurance company called to say that the claim was filed a few hours beyond the cut-off reporting window and was refused.

I was livid as I knew I was a few hours on time. It’s a good thing I kept a log sheet that the contractor gave me when I first made the report. Yet even with this evidence that I made the report within the reporting window, the officer refused to entertain the claim.

This was because although I made the report within the stipulated time frame, the contractor submitted it to them at a much later time.

I contacted the contractor about it and they speculated that I must have reported late even after referencing the case number. Only when I presented the log sheet did they admit their mistake.

Even so, the insurer still persisted in rejecting the claim. Only a few days later, after some hard-worded calls to the contractor was the situation finally resolved.

While this predicament arose from human error, it is a great example of how far an extent insurers would go to exploit opportunities to deny claims.

When I shared this story with real estate investment groups, I learned that I what I experienced was just a storm in a teacup.

A lot of people actually face worse problems and don’t receive any loss drafts at all.

The most common reason was that an insurer deemed that the damage was already present before a storm or fire occurred. Thus they take the position of non-liability.

To avoid such situations, the most important thing to do is to take photos and videos of areas of the house before certain events. Make this an annual event.

Then if something bad happens, document the damage so that they can be compared in a before and after manner.

What if your feel that the insurance company is acting in bad faith?

When we consider that losses for real property can go into hundreds of thousands, it’s no surprise to hear stories of insurer side-stepping these types of claims.

While we like to think that we live in a fair world and billion-dollar corporations would honor their contracts, this is not always the case.

If you feel that you are fully entitled to a claim with your interpretation of the terms in a real property insurance policy, and gets declined, it might be possible that the insurer is acting in bad faith.

In this case, contact the state department of insurance or a qualified and experienced insurance lawyer for help.

When insurers act in bad faith, they can even be sued for damages arising from emotional distress and punitive damages.

Do speak to an attorney about this.

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