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property insurance, what is it definition and concept

Property insurance is the protection of property interests of owners of real estate, vehicles, works of art, goods, cargo, equipment, investments, upon the occurrence of certain events (fire, flooding, man-made disasters, thefts, natural disasters). Compensation for material damage is made at the expense of monetary funds formed from monetary contributions of property owners. Property insurance for individuals is voluntary, for legal entities it is often prescribed by law. Implies full or proportional indemnification.

Property Insurance Contract

The property insurance contract is concluded between the owner and the insurance company. Before the contract is executed, the value of the insured object is usually assessed. The sum insured cannot be more than the actual value of the object at the time of signing the contract. The term of the contract is from one year or more with an annual recalculation of the value of the property and the number of payments. Individuals and legal entities can insure the full or partial value of the object. It is possible to insure the same property with different insurers. The total amount of compensation in this case should not exceed the value of the object.

Insurance of property of legal entities

The legislation provides for the norms of compulsory and voluntary insurance of property of legal entities. Compulsory insurance is subject to property owned by the state, objects of increased danger, collateral values, vehicles purchased on credit or under a leasing agreement. The insurance contract can be issued both for the entire property of the complex, and for its individual parts. Compensation for damage to a legal entity is paid only if the company is not at fault for the occurrence of the insured event. The existence of an insured event must be documented.

Insurance of property of individuals

The law does not provide for compulsory insurance of property of individuals, but often the conclusion of such an agreement is a mandatory requirement of banks when issuing mortgage loans, loans for the purchase of vehicles. According to statistics, only 3% of individuals in the Russian Federation insure their own property. In Europe and the United States, property insurance contracts are concluded by 90% of owners. Insurance payments cover the full cost of lost or part of the cost of damaged material assets. The maximum payout amount depends on the appraised value of the property, limits, deductible, and other factors.

Voluntary property insurance

Voluntary property insurance involves the conclusion of an agreement with the insurer at the initiative of the company – the owner of material assets. Legislative acts regulating this type of insurance are the Laws of the Russian Federation “On Insurance” dated November 27, 1992, “On the organization of insurance business in the Russian Federation” dated 10.12.2013. For organizations, the costs of voluntary insurance, in accordance with the legislation of the Russian Federation, are included in the costs associated with production and sales, as other expenses. Voluntary property insurance is always limited in terms by the terms of the contract.

Compulsory property insurance

Compulsory property insurance is provided for by the legislation of the Russian Federation for legal entities. It provides for legal protection of state, personal, leasing, pledge, rental property. Compensation for damage is provided for the entire property complex or its individual parts. The insurance contract includes a standard list of risks, which in some cases can be supplemented. The terms of property insurance are established in the Insurance Rules registered with state bodies. The contract should always cover the following issues:

  • insurance liability;
  • insurance valuation and amounts;
  • rules and procedure for compensation for damages.

Property Insurance Cost

The cost of property insurance is determined by the contract concluded between the insurer and the policyholder. It depends on several factors: the estimated value of material assets, the degree of their depreciation, the list of risks, the amount of compensation, the amount of deductible. The approximate amount of the cost can be determined using online calculators. The exact value is determined when individuals and legal entities apply to the insurance company to conclude a contract. Insurers offer different conditions, various types of insurance policies, from which citizens or companies can choose the best ones that meet their goals.

Property Insurance Rules

The rules for insuring the property of individuals and legal entities are established by the legislation of the Russian Federation and insurance companies. They often differ for legal entities and individuals. They contain:

  • General Provisions,
  • explanation of the accepted terminology,
  • the procedure for concluding a contract,
  • objects of insurance;
  • Time;
  • Rates;
  • a list of conditions for compensation for damages,
  • types of risks,
  • principles for determining the value of property, deductibles, the amount of damage and the amount of insurance payments,
  • the procedure for making payments;
  • liability of the parties;
  • dispute resolution procedure and other provisions.

Classification of property insurance

In the insurance business, the classification of property insurance by categories of clients, types of objects, types of risks, and conditions has been adopted. These types of insurance are specified in the license issued to the insurer to carry out activities. There are the following types of property insurance:

  • voluntary and mandatory;
  • individuals and legal entities;
  • transport, buildings (houses, cottages, garages, plots, workshops, objects of unfinished construction), agricultural (plantations, animals, equipment, vehicles), property of citizens, property of organizations.

Property and Residential Insurance Programs

Insurance companies develop various property and residential insurance programs. Thanks to them, each policyholder can choose for himself the optimal conditions for the protection of property interests, compensation for damage. The Government and municipal authorities are developing special preferential programs that make insurance accessible to all segments of the population, increase the attractiveness of this type of service and the social protection of the population. Financial institutions develop property insurance programs for mortgage lending, leasing of objects.

Insurance of real estate

Insurance relations of real estate objects apply to buildings, premises, structures, plots, complexes owned by individuals and legal entities. The owner can insure all or part of the property. Individuals insure real estate voluntarily, for legal entities – a compulsory insurance procedure is provided. The amount, conditions and method of indemnity depend on the insurance liability system. The sum insured cannot be higher than the appraised value of the object. The contract provides for full or partial compensation for damage resulting from the occurrence of an insured event.

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