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Course: Financial Literacy > Unit 6
Lesson 6: Property insurance options and costsFeatures of property insurance
Property insurance policies have different features and coverage, like replacement cost, which pays to fix or replace your home or belongings with new items, and actual cash value, which pays based on what your items are worth today. Other coverages include liability, which protects you if someone gets hurt on your property, personal property for your belongings, and additional living expenses if you need to stay somewhere else while your home is being fixed. Created by Sal Khan.
Want to join the conversation?
- sal: "now when your house burns down if you dont have insurance you have nothing left. get insurance or else...."
smiles as he stops the video(6 votes) - Is it better to get property insurance at any place you own if you are going to live there for more than a year or is it better to just get property insurance for any place you own?
What would happen if something happened to that property you were renting off of a landlord and the landlord doesn't have property insurance?
Do you have to have property insurance on the property if you were putting it up for rent?
If you owned a store or a small business could you put property insurance on it?
How much is property insurance usually?
Does the monthly cost depend on the size of the property?
Could you put property insurance on farming land or cattle land?
Are there special types of property insurance for different types of properties?(1 vote)- Read the next article in this lesson. I think a lot of your questions can be answered there.(3 votes)
Video transcript
- So let's talk a little bit
more about property insurance, and in particular, what are scenarios in which it might come
into effect or be relevant? And then also how you might be paid back for whatever losses you might have. So there's kind of two broad categories of bad things happening. One is something bad happens
to your property itself. The house burns down, there's a flood, there's an earthquake, there's theft. Things are stolen, things are vandalized. The other category is
something bad happened in the house and a court
decides that it's your fault. So this could be a situation where maybe you rent
the house out to someone and you knew that there
was some structural damage, but a ceiling fan still
falls on that person even though you were warned. Well then you are, then that's probably some
liability that you have there. And they might have a legitimate lawsuit. Or let's say your sidewalk
has a huge tripping hazard that you knew about and you just decided not to fix it. Someone comes and trips on your walkway or your driveway and they hurt
themselves in a serious way. Maybe they could sue you,
maybe they could win. You have liability there, and
that could be a lot of money. It could be tens of thousands or even hundreds of thousands of dollars depending on what goes on. So these are all situations that you want to insure yourself against. Obviously, if your house burns down, that could cost a lot of money. If someone trips and
falls and hurts themselves on your property and they
sue you and they win, that could also cost a lot of money. Even if they lose, just the legal expenses
could cost a lot of money. Now the other situation is what will the actual
insurance companies pay for? So if you're thinking about the property actually getting destroyed, there's two ways to think about it. They could say, "Hey, we're just gonna pay
to replace the property." And so there you're talking
about replacement cost. So what would it cost and
say to rebuild the house and then to buy the
different things that you had in the house, the personal property if it's insured that you had in your house. Another version would be cash value. What was the the value of of the house? And maybe they pay that. Now, the value for a house, it's very seldom that the
actual land gets destroyed. And oftentimes the land is a big part of the value of the house. So even if your house burns down, and if your house will say worth $200,000 they're unlikely to just
give you the cash value of that house of $200,000 because the land still has value. More likely you're gonna be
dealing with replacement costs. Now another thing that
usually an insurance policy will cover is if heaven
forbid your house burns down or any of these bad things happen, you're going to need
another place to live. And so there's this notion of additional living expenses of, "Hey, if you need six months
someplace else to live while your house gets repaired, or a year someplace else to live while your house gets repaired, then that might be covered as well." So these are all things to look into when you get property insurance.