Which add-on covers are recommended for property insurance?

We suggest policyholders consider subscribing to add-ons available under the property insurance cover. Below we cover an exhaustive list of add-ons for you to evaluate the relevant ones for your property insurance –

Key Takeaways

• The Obsolescence Solution: Involuntary Betterment is crucial for older plants. It ensures that if an exact replacement for old machinery isn’t available, the insurer pays for the nearest modern equivalent without penalizing the insured for “upgrading.”

• Data as an Asset: Standard policies cover the “disk” but not the “data.” Add-ons like Valuable Papers and Records cover the expensive process of gathering and re-assembling lost information.

• Global Mobility: The Laptop Computer add-on provides worldwide protection, moving the coverage beyond the physical walls of the office for employees on the go.

• Automatic Grace Periods: The New Location Cover offers a 15-day window of automatic protection for newly acquired properties, giving businesses time to update their paperwork without losing coverage.

• Environmental Responsibility: Pollutant Clean-up covers the high cost of removing debris and cleaning land or water after a contamination event, though it typically excludes government fines.

• Financial Protection: Deferred Payments coverage acts as a credit safeguard, protecting the outstanding balance if a property you sold on an installment plan is destroyed before final payment.

1. LONG-TERM AGREEMENT-

Insurers offer premium discounts for longer coverage agreements i.e. for 3-5 year coverage terms.

2. TEMPORARY REPAIR COST-

Cover for the cost of reasonable and necessary temporary repair of the damaged property.

3.  MODIFICATION COSTS AND EXPENSES FOR INCOMPATIBILITY OF EQUIPMENT-

Cover for costs involved in case of incompatibility between replacement equipment and the existing equipment. For example –

• Modification of equipment including computers and ancillary equipment
• Restoration of computer records

4. LAPTOP COMPUTER –

Worldwide coverage for laptop computers provided the total value of the Laptops owned by the insured is covered. The excess is reduced to 5% of the sum insured for each Laptop.

5. ROADS PAVEMENTS AND STREET FURNITURE-

Extends coverage to include damage to roads, pavements, and street furniture provided their total value is covered in the sum insured.

6. MOULD & FUNGI ENDORSEMENT –

Insures additional damage to property by mold, mildew, fungus, or spores after damage to the property by one of the listed perils in the standard fire and special perils policy.

7. ADDITION CUSTOMS DUTY –

Cover for Additional Custom Duty incurred by the insured over and above the Custom Duty amount taken into account for the sum insured of the damaged. So, the excess under this extension is reduced to 5% of the admissible Additional Custom Duty.

8. LEAK SEARCH/FINDING COST –

Cover for necessary and reasonable expenses incurred in locating and obtaining access to repair leaks or other damages.

9. DEFERRED PAYMENTS-

Covers loss of outstanding amount in case property is sold under a deferred payment plan. Therefore, this cover requires the insured to perform all reasonable efforts, including legal action, for collection of the outstanding amount due or to regain possession of the property.

10. DAMAGE TO BUILDING (OCCASIONED BY THEFT) –

Cover for damage to the insured premises caused during an incident of burglary or theft.

11. COST OF RE-WRITING RECORDS –

Cover for costs, charges, and expenses incurred in the replacement/restoration of documents that may have been destroyed damaged, or mislaid (only for the value of the material and not for their value to the insured). Therefore, documents may consist of deeds, views, agreements, maps, plans, records, books, letters, certificates, etc. however bearer bonds, coupons, bank currency notes, etc. are covered under this insurance.

12. EMPLOYEES’ PERSONAL PROPERTY/EFFECTS –

Cover for loss or damage to the personal property of employees for which the insured is responsible whilst at the premises of the insured.

13. PROPERTY OUTSIDE/AWAY FROM THE PREMISES –

Cover for property outside/away from the insured’s premises including stocks outside plant premises, in tanks/pipelines, or for conversion. Also, stock in the depot whether owned or leased.

14. VESSEL IMPACT ON JETTY –

Cover for damage caused by vessel impact to the crude or product jetty used by the insured.

15. DEFENSE COSTS-

Cover for the legal cost to defend a suit that is against the insured and/or its directors, and officers. And also employees for alleged physical loss or damage to the property of others. Which was in the care, custody, or control of the insured as well.

16. NEW LOCATION COVER-

Cover for the property at a new location is required by the insured up to the sum insured limit specified under the extension. Also, grants the coverage automatically up to a period of 15 days from the date of acquisition with an implicit understanding that the insured will declare the value of the property and take coverage by paying an additional premium from the date of acquisition on a pro-rata basis within this time period.

17. LIABILITY FOR DUTY –

Cover for the insured’s liability for customs, excise tax, and, other duties which the insured may also, become liable to pay in the event of loss or damage

18. POLLUTANT CLEAN UP AND REMOVAL –

In the event of direct physical loss or damage to the property insured arising directly from seepage or pollution or contamination, therefore, extension covers costs for –

1. Removing debris from the damaged or destroyed property
2. Cleaning up the lost location
3. Cleaning up the pollutants from land and water which is at the insured’s premises

However, the extension does not insure against fines or penalties incurred by order of the government agency, court, or other authority.

19. UNDECLARED PROPERTY OF OTHERS –

Cover for the property of others which the insured is responsible for or has agreed to insure but, the insured has not declared such property under its books or records.

20. VALUABLE PAPERS AND RECORDS MEDIA & SECURITIES –

This extension enhances the definition of property to include valuable papers and records, including media, and also securities. In case of damage or loss to the above items, the basis of valuation and settlement shall be the cost to reproduce the item at the current time. Also, including the cost of gathering and assembling information. However, the definition of valuable papers and records, media, and securities is as follows –

PS: Securities means all negotiable and non-negotiable instruments or contracts representing either money or other property, which includes revenue and other stamps, tokens, and tickets, but not money.

Summary Table: Key Property Insurance Add-ons & Their Purpose

21. INVOLUNTARY BETTERMENT –

In the event that a new property of like kind and quality is not obtainable. While the property is as similar as possible to the damaged one and capable of performing the same function shall be deemed to be the new property. Therefore, you should not consider this as betterment. Hence, the insured does not need to share part of the replacement cost with the insurance company.

Since having explained the above add-ons, we would suggest you evaluate your requirements and subscribe to the relevant ones for property insurance coverage.

Frequently Asked Questions (FAQs)

1. What is “Involuntary Betterment,” and why do I need it?

A) If your 10-year-old machine is destroyed and that specific model is no longer sold, you have to buy a newer version. Normally, insurers might ask you to pay for that “upgrade.” This add-on ensures the insurer pays for the modern equivalent because the “betterment” was forced upon you by the unavailability of the old part.

2. Does “Cost of Re-writing Records” cover the value of the information lost?

A) No. It covers the clerical and gathering costs—the labor and materials needed to reproduce the documents. It does not compensate for the “intellectual value” or the business advantage that those records provided.

3. Why would I need “Defense Costs” in a property policy?

A) If you are holding a client’s property (for repair or storage) and it gets damaged, the client might sue you. This add-on pays for the lawyers and legal fees required to defend you and your directors against such suits.

4. Is my stock covered if it’s sitting in a third-party warehouse?

A) Only if you have the Property Outside/Away from Premises add-on. A standard policy only covers the specific address listed. This extension protects your stock in transit, in pipelines, or in leased depots.

5. How does the “Leak Search/Finding Cost” extension help?

A) Sometimes the damage isn’t the leak itself, but the cost of tearing down a wall or digging up a floor to find the leak. This add-on pays for these exploratory costs, which can often be more expensive than the actual pipe repair.

About The Author

Shivani

MBA Insurance and Risk

She has a passion for property insurance and a wealth of experience in the field, Shivani has been a valuable contributor to SecureNow for the past six years. As a seasoned writer, they specialize in crafting insightful articles and engaging blogs that educate and inform readers about the intricacies of property insurance. She brings a unique blend of expertise and practical knowledge to their writing, drawing from her extensive background in the insurance industry. Having worked in various capacities within the sector, she deeply understands the challenges and opportunities facing property owners and insurers alike.