Property Risk Management in California At this point you should feel somewhat comfortable with most of the overall picture of risk, but despite the many examples of risk management and types of coverage you have seen, the details of coverage are not explicit yet. We will elaborate on property risks, including electronic commerce, or e-commerce, risk and global risk exposures. In this, we cover the following:
The most important part of property coverage is that you, as the first party, are eligible to receive benefits in the event you or your business suffers a loss. In contrast, liability coverage, pays benefits to a third party if you cause a loss (or if someone causes you to have a loss, his or her liability insurance would pay benefits to you.
Property can be classified in a number of ways, including its mobility, use value, and ownership. Sometimes these varying characteristics affect potential losses, which in turn affect decisions about which risk management options work best. A discussion of these classifying characteristics, including consideration of the hot topic of electronic commerce (e-risk) exposures and global property exposures, follows.
Property Risk Management in California Physical property generally is categorized as either real or personal. Real property represents permanent structures (realty) that if removed would alter the functioning of the property. Any building, therefore, is real property. In addition, built-in appliances, fences, and other such items typically are considered real property.
Physical property that is mobile (not permanently attached to something else) is considered personal property. Included in this category are motorized vehicles, furniture, business inventory, clothing, and similar items. Thus, a house is real property, while a stereo and a car are personal property. Some property, such as carpeting, is not easily categorized. The risk manager needs to consider the various factors discussed below in determining how best to manage such property. No region of the United States is safe from environmental catastrophes. Floods and flash floods, the most common of all natural disasters, occur in every state.
The cost of insurance to cover frequent losses (as experienced by many property exposures) is high. To alleviate the financial strain of frequent small losses, many insurance policies include a deductible. A deductible requires the insured to bear some portion of a loss before the insurer is obligated to make any payment. The purpose of deductibles is to reduce costs for the insurer, thus making lower premiums possible. The most common forms of deductibles in property insurance are the following:
Almost every home, family, and business has risk exposures because of the use of computers, the Internet, and the Web; we refer to this as e-commerce property risk. You use the Internet as a research tool. Every time you log on, you are exposed to risks from cyberspace. Most familiar to you is the risk of viruses. But there are many additional risk exposures from electronic business, both to you as an individual and to businesses.