Property Insurance
Property Insurance: 25 technical terms explained – definition, synonyms and legal basis.
Demolition Costs
Synonyms: Demolition expenses
Demolition costs are the expenses for tearing down building remains that can no longer be salvaged after a loss event; combined homeowners property insurance typically covers them up to a defined share of the sum insured.
Concept
Beyond the direct property damage, a loss event at the insured site often generates additional costs for demolishing parts of the building that were damaged beyond salvage and must be cleared before reconstruction can begin.
Coverage
Combined homeowners property insurance typically covers demolition costs up to a defined share – often up to 100% of the sum insured – as an insured ancillary cost. The exact percentage and any absolute caps vary by insurer and tariff and should be checked in the policy wording.
Distinction
Demolition costs must be distinguished from debris removal costs: demolition costs relate to the deliberate dismantling of damaged structural elements, while debris removal costs cover clearing away rubble and other remains. Both cost types are commonly agreed and settled together in practice.
Drainage Pipes
Synonyms: Sewage pipes
Drainage pipes carry wastewater out of a building; breakage damage to them inside the building is typically covered under the water damage peril in combined homeowners property insurance.
Scope of Cover
Breakage damage to drainage pipes inside the insured building is typically covered under the water damage peril. Extensions covering drainage pipes below the building, on the insured property, or beyond its boundary are often offered as add-on modules.
Practical Issues
Pipes beneath foundations and outside the building are rarely maintained, and leaks often go unnoticed. Municipalities estimate that a significant share of drainage pipes on insured properties are in poor condition. Besides pure breakage, damage from displaced joints and root ingrowth is common. For water-protection reasons, many jurisdictions mandate periodic leak-tightness inspections.
Distinction
Drainage pipes (wastewater, flowing out of the building) must be distinguished from supply pipes (fresh water/gas, flowing into the building); policy wording often applies different scopes of cover and exclusions to each pipe type.
Aircraft Impact
Synonyms: Crash of unmanned aerial vehicles
Aircraft impact is an insured peril in several property lines covering damage from an aircraft, its parts, or its cargo striking insured property.
Concept
Aircraft impact is an insured peril in various property lines, including combined homeowners property insurance. It covers damage from an aircraft itself striking insured property, as well as from parts of the aircraft or its cargo. Aircraft are defined under applicable aviation law.
Development
In modern policy wording, the peril “aircraft impact” has replaced the older term “crash or impact of (un)manned aerial vehicles.” Historically, the cover developed out of the need to distinguish debris damage, which was originally uninsured, from explosion or fire damage, which was already covered under the fire peril.
Distinction
Fireworks are considered neither unmanned aerial vehicles nor aircraft for purposes of this cover, so damage they cause falls outside this peril.
Riot
Synonyms: Aufruhr
Riot is a political peril related to civil commotion in which parts of the population openly rise up against state authority, and is often written together with lockout as an extension of cover.
Concept
Riot describes a political peril related to civil commotion in which segments of the population openly rise up against state authority. It is classified among the so-called political risks in property insurance.
Coverage
Riot is generally excluded from the standard scope of classic property insurance and is typically added through political-risk extensions together with related perils such as strikes and lockouts. Depending on market and risk profile, a separate sub-limit or deductible may apply to these perils.
Practical Relevance
For multinational companies with operations in politically unstable regions, deliberately assessing and incorporating the riot peril into their risk management is particularly important, as loss potential during civil unrest can be substantial.
Debris Removal Costs
Synonyms: Disposal costs
Debris removal costs are the expenses for clearing and disposing of rubble and other unsalvageable remains at the loss site; combined homeowners property insurance typically covers them on a proportional basis.
Concept
Beyond the direct property damage, a loss event at the insured site often creates costs for clearing away rubble and other unsalvageable remains so that reconstruction can begin.
Coverage
Combined homeowners property insurance typically covers debris removal costs up to a defined share of the sum insured, often up to 100%, as an insured ancillary cost.
Practical Issue
Contaminated fire debris generates significantly higher disposal costs than uncontaminated material. Debris removal costs are also subject to elevated inflation risk due to tightening environmental regulation, which is why insurers and policyholders should regularly review the agreed sub-limits.
Removal Damage
Synonyms: Salvage damage
Removal damage is damage to insured property that occurs while it is being moved out of a space threatened by an insured peril, and is generally covered under property insurance.
Concept
Removal damage is damage to insured property caused by moving it, as a rescue measure, out of a space threatened by an insured peril – for example, when furniture is hastily removed from a building section threatened by fire.
Areas of Application
In fire insurance, coverage of removal damage is set out by statute. In other property insurance lines, standard policy conditions generally cover property that is removed from the insured location in temporal and spatial connection with a loss event that has already occurred or is imminent.
Significance
Covering removal damage creates an incentive to take rescue measures quickly during a loss event, without the policyholder having to bear the resulting consequential damage themselves.
Off-Premises Cover
Synonyms: Aussenversicherung
Off-premises cover extends property insurance to movable property located outside the insured location named in the policy, supplementing the location-bound base cover.
Concept
Property insurance is generally location-bound, covering insured property only at the location named in the policy. Off-premises cover breaks with this principle by extending insurance protection to movable property even while it is temporarily located outside that insured location.
Design
The scope of off-premises cover is set out in the policy and is often limited to certain categories of property, time periods, or geographic boundaries (e.g. Europe). A reduced sub-limit compared to the base cover at the insured location typically applies as well.
Practical Relevance
For companies whose mobile equipment, tools, or demonstration materials are regularly deployed away from their premises, off-premises cover is an important extension to avoid coverage gaps during transport, installation, or field assignments.
Lockout
Synonyms: Aussperrung
A lockout is an employer's industrial action tool that temporarily excludes employees from the workplace; as a political risk, it is covered under property insurance extensions.
Concept
A lockout is an employer’s tool in industrial action, forming the counterpart to a strike as a tool of employees. The employer temporarily and collectively excludes employees from the workplace to exert economic pressure in a collective bargaining dispute.
Insurance Classification
As a peril that can lead to business interruption and property damage in connection with industrial action, a lockout is typically covered under extended-coverage property insurance within the group of political risks, alongside strikes and riots.
Practical Relevance
Companies with exposed sites in industries prone to frequent labor disputes should check whether, and to what extent, consequential losses from lockouts – such as business interruption or property damage – are covered under their property insurance.
Contractors' Works Insurance
Synonyms: Bauleistungsversicherung, Builder's Risk Insurance, Bauwesenversicherung
Contractors' works insurance covers physical damage to the works of a construction project during the construction period against unforeseen events.
Concept
Contractors’ works insurance covers physical damage to the works under construction on a building project that arise during the construction period from unforeseen events, such as storm, flooding, theft, operating errors, or design defects.
Policyholder and Beneficiaries
The policyholder under contractors’ works insurance is typically the project owner or a contractor; the policy is, however, frequently taken out as a joint owner/contractor works policy including all trades involved in the construction, in order to avoid recourse disputes among the parties involved.
Distinction from CAR/EAR Insurance
Contractors’ works insurance resembles construction all risks/erection all risks (CAR/EAR) insurance but typically differs in its stronger focus on conventional building and civil engineering, whereas CAR/EAR policies are often used for larger, more complex industrial and infrastructure projects with additional erection and testing phases.
Robbery
Synonyms: Beraubung
Robbery is the taking of insured property through the use or threat of force against a person, and is a distinct peril in burglary and robbery insurance.
Concept
Robbery refers to the taking of insured property where the perpetrator uses force against a person or threatens an immediate danger to life or limb in order to overcome or prevent resistance by the rightful holder.
Distinction from Burglary
Unlike burglary, where the perpetrator gains unnoticed access to the insured premises, robbery requires direct confrontation with a person against whom force is used or threatened. Both perils are commonly covered together in practice under a burglary and robbery policy.
Typical Case Groups
Typical case groups include the robbery of cash or valuables during cash-in-transit operations, an assault on business premises during opening hours, and extortion by robbery, where the handover of property is coerced through the threat of force.
Salvage Costs
Synonyms: Bergungskosten
Salvage costs are expenses incurred to rescue, secure, or clear insured property in connection with an insured event, reimbursed by the insurer in addition to the sum insured.
Concept
Salvage costs are expenses that become necessary to avert or mitigate an imminent or already occurred insured event, in particular to rescue, secure, or clear insured property.
Reimbursability
Salvage costs are regularly reimbursed by the insurer in addition to the agreed sum insured, provided they could reasonably be considered necessary under the circumstances. This applies regardless of whether the rescue measure was ultimately successful.
Distinction from Debris Removal and Demolition Costs
Salvage costs must be distinguished from debris removal and demolition costs, which arise after a loss has occurred for the removal of debris and rubble. Both types of costs are frequently addressed together in property insurance as insured additional costs within a separate coverage section.
Lightning Strike
Synonyms: Blitzschlag
Lightning strike is the direct discharge of lightning onto an insured property and is treated as a distinct, typically covered peril in property insurance.
Concept
Lightning strike refers to the direct discharge of lightning onto an insured property. In property insurance, it is treated as a distinct peril that, alongside fire and explosion, is regularly included in coverage.
Distinction from Power Surge Damage
Lightning strike in the narrow sense, which requires a direct hit, must be distinguished from power surge damage, which arises from an indirect voltage spike in electrical systems caused by lightning activity. Many policy wordings cover power surge damage only to a limited extent or against an additional premium.
Relevance for Claims Handling
In claims handling, it is often disputed whether a loss resulted from a direct lightning strike or merely from an indirect power surge, since this determines whether the loss is to be indemnified in full or only to a limited extent by the insurer.
Fire Insurance
Synonyms: Brandversicherung
Fire insurance covers property damage caused by fire, lightning strike, explosion, or the impact of an aircraft on the insured property.
Concept
Fire insurance is one of the oldest lines of property insurance and covers damage to insured buildings, business equipment, and stock caused by fire, lightning strike, explosion, or the impact of an aircraft, its parts, or its cargo.
Historical Development
Fire insurance developed out of medieval fire insurance mutuals and public fire funds and historically forms the core of industrial property insurance. Today it is usually a component of broader combined property and natural hazards policies.
Interaction with Other Coverages
In practice, fire insurance is frequently combined with other property perils such as water damage, storm, or burglary into a combined property policy, and it also regularly forms the basis for business interruption insurance, whose coverage is triggered by the occurrence of physical damage insured under the fire policy.
Breakage Damage
Synonyms: Bruchschaden
Breakage damage is the sudden mechanical destruction of a machine part or a glass surface and is the central insured event in machinery and glass insurance.
Concept
Breakage damage is a sudden, unforeseen mechanical destruction or damage to a machine part, plant, or glass surface, typically caused by material defects, operating errors, design flaws, or external influences.
Relevance in Machinery Insurance
In machinery insurance, breakage damage is the central insured event: unlike fire insurance, machinery insurance specifically covers internal operational damage that is not attributable to external natural perils but to material fatigue, design defects, or operating errors.
Relevance in Glass Insurance
In glass insurance, breakage damage refers to the shattering of window, shop-front, or facade glass, regardless of the cause of breakage. Glass insurance is typically structured as an all-risks breakage policy and thus covers a very broad spectrum of loss causes.
Bundled Policy (Bündelversicherung)
Synonyms: Bündelversicherung, Package Policy, Kombinierte Versicherung
A bundled policy combines several legally independent insurance lines into a single policy with a unified premium invoice.
Concept
A bundled policy combines several legally independent insurance lines — such as home contents, buildings, glass, and personal liability — into a single policy with a unified premium invoice and a common due date.
Distinction from a True Combined Policy
Under a bundled policy, the individual lines remain legally separate contracts that can formally be terminated independently; this distinguishes it from a true combined policy, in which the various coverage modules are merged into a single contract with a unified fate.
Benefits for Policyholders and Insurers
For policyholders, a bundled policy offers the advantage of simplified administration with a single premium invoice and a single point of contact, while insurers benefit from administrative economies of scale and typically higher customer retention through the bundled customer relationship.
Burglary
Synonyms: Einbruchdiebstahl
Burglary is theft in which the perpetrator gains access to the policyholder's premises by overcoming an obstacle.
Concept
Burglary is a particular form of theft in which the perpetrator, in order to take property, gains access to the policyholder’s premises by overcoming an obstacle using more than negligible force, for example by forcing a lock, breaking a window, or using a false or duplicate key.
Defining Elements
Standard insurance conditions exhaustively list the methods of entry recognized as burglary, such as entering a building by forcing open a window or door, opening containers with a tool not intended for that purpose, or entering with an original key obtained through theft; because of this exhaustive enumeration, precisely establishing the facts of the incident is of central importance to the coverage question.
Security Requirements
Because burglary regularly involves high loss amounts, insurers frequently require compliance with certain minimum security standards (for example regarding lock technology, window security, or alarm systems), non-compliance with which, as a breach of policy conditions, can lead to a reduction or denial of the insurance benefit.
First Loss Insurance (Erstrisikoversicherung)
Synonyms: Erstrisikoversicherung, First Loss Sum Insured
In first loss insurance, the sum insured is not set to the full value of the insured object but to a freely chosen amount (the "first loss"), up to which losses are indemnified in full without applying the underinsurance rule.
Concept
In first loss insurance, unlike full value insurance, the sum insured is not set to the full insured value of the object, but to an amount freely chosen by the policyholder, generally significantly lower (the so-called “first loss”). Up to this agreed sum, losses are indemnified in full, and the insurer cannot invoke underinsurance; if the loss exceeds the sum insured, the policyholder bears the excess themselves.
Areas of Application
First loss insurance is particularly suited to risks where a total loss is practically excluded or highly improbable (e.g. theft insurance for valuables in large storage facilities, business interruption for redundant sites) and where insuring the full theoretical maximum loss would not be economically sensible.
Relevance for Insurance Practice
Correctly setting the first loss sum requires careful assessment of the realistic maximum loss (probable maximum loss); a sum set too low leads to a de facto coverage gap in the event of a claim, despite the removal of the underinsurance rule.
Explosion
Synonyms: Explosion
Explosion is a sudden release of force caused by the tendency of gases or vapors to expand, and one of the basic perils of fire insurance.
Concept
In an insurance context, explosion is a sudden release of force resulting from the tendency of gases or vapors to expand, and, alongside fire, lightning strike, and aircraft impact/crash, is one of the four classic basic perils of fire insurance.
Delimiting the Concept of Explosion
Insurance conditions regularly contain a legal definition of explosion based on a sudden release of force caused by the tendency of gases or vapors to expand; not every rapid chemical reaction or every bang meets this definition, which is why, particularly in the case of deflagrations or implosion-like events, the precise classification can be disputed.
Special Case: Vessel Explosion
For the explosion of a vessel (such as a boiler or a pipeline), many policy wordings additionally require that the vessel’s wall be ruptured to an extent that results in a sudden equalization of the pressure difference between the inside of the vessel and its surroundings; if the wall is merely damaged without a sudden pressure equalization occurring, classification as an explosion within the meaning of the insurance conditions can be questionable.
Consequential Loss
Synonyms: Indirect Loss, Folgeschaden
Consequential loss is an indirect economic loss resulting from a preceding physical or bodily injury loss, without constituting that loss itself.
Concept
Consequential loss is an indirect economic loss resulting from a preceding, direct physical or bodily injury loss, without itself constituting a physical loss — for example, loss of income resulting from damaged production equipment.
Relevance for Coverage Delineation
Many property and liability policies expressly exclude consequential loss or cover it only under separate coverage modules, such as business interruption insurance; the distinction between direct physical loss and indirect consequential loss is frequently the subject of coverage disputes, particularly for financial losses without a preceding bodily injury or property damage.
Examples
Typical consequential losses include lost profit, additional operating costs to maintain business operations after a loss, contractual penalties for late delivery, and reputational damage arising from an original physical or bodily injury loss.
Frost Damage
Synonyms: Frostschaden
Frost damage is property damage caused by cold exposure, such as to water-bearing pipes, and can be treated differently across property insurance conditions.
Concept
Frost damage is property damage caused by cold exposure, typically occurring when water inside pipes, heating systems, or other water-bearing installations freezes, expands, and thereby damages or ruptures the pipe or connected component.
Coverage under Water Damage Insurance
Frost damage to pipes within a building is regularly covered under water damage insurance, with conditions frequently distinguishing between the frost damage to the pipe itself and the resulting water damage to the building or household contents.
Duties in the Event of Vacancy
For extended vacancy or non-use of a building during the cold season, insurance conditions frequently require compliance with particular policy duties, such as adequately heating the building or fully draining water-bearing systems; a breach of these duties can lead to a reduction or denial of the insurance benefit in the event of a claim.
Household Contents Insurance (Hausratversicherung)
Synonyms: Hausratversicherung, Home Contents Insurance, Haushaltsversicherung
Household contents insurance covers damage to a household's movable property caused by fire, burglary, water damage, storm/hail, and optionally other natural hazards.
Concept
Household contents insurance is a personal lines property policy that covers the movable property within a home (furniture, clothing, electronics, valuables) against defined perils. Standard base coverage usually includes fire, explosion, water damage, burglary, vandalism following burglary, and storm/hail.
Extensions
Natural hazard perils such as flood, earthquake, subsidence, snow load, or avalanche are not included in the base cover in many markets and must be added as a supplementary module (“natural hazards cover”). Other common extensions include bicycle theft, glass breakage, cover away from the home, and a contractual waiver of underinsurance.
Sum Insured and Underinsurance
The sum insured is usually calculated based on living space and a value per square meter; many insurers grant a contractual waiver of underinsurance if this calculation method is followed, so that no reduction is applied in the event of a claim due to an insufficient sum insured.
Civil Commotion (Innere Unruhen)
Synonyms: Innere Unruhen, Civil Unrest
Civil commotion refers to violent disturbances by a crowd within a state that can be included in or excluded from property insurance policies as a distinct peril.
Concept
Civil commotion refers to violent disturbances by a larger crowd within a state’s territory that do not reach the intensity of civil war or insurrection but go beyond isolated, individual acts of violence. Typical manifestations include violent demonstrations, disturbances connected with strikes, or spontaneous riots.
Insurance Treatment
In property insurance, losses caused by civil commotion are frequently treated together with strike and lockout risks as a distinct peril group (SRCC – Strikes, Riots and Civil Commotion), which, depending on the market and policy, is either included, included for an additional premium, or generally excluded. The distinction from war and warlike events, which regularly constitute a general exclusion, is of considerable practical importance for claims handling.
Relevance for Industrial Insurance
For internationally active industrial companies with locations in politically unstable regions, cover for civil commotion risk is a material component of property and business interruption insurance; corresponding risks are frequently managed separately through specialized political risk insurers or accumulation controls.
Water Damage from Pipes (Leitungswasserschaden)
Synonyms: Leitungswasserschaden, Leitungswasser
Water damage from pipes arises when water escapes improperly from supply or drainage pipes, water-carrying installations, or connected appliances, and is one of the standard base perils covered by homeowners and contents insurance.
Concept
Water damage from pipes occurs when water escapes improperly from water supply or drainage pipes, water-carrying installations (e.g., heating, air conditioning, or sprinkler systems), or connected appliances such as washing machines or dishwashers, thereby causing property or building damage.
Coverage in Property Insurance
Alongside fire, storm, and hail, water damage from pipes is one of the classic base perils covered by homeowners and contents insurance. Unlike natural hazard perils such as flood, which frequently require a separate optional extension, water damage from pipes is generally covered as standard.
Causes of Loss and Prevention
Common causes of loss include pipe bursts due to material fatigue, frost damage to insufficiently insulated pipes, and defects in connection hoses of household appliances. Because of the often substantial consequential damage (moisture penetration of building components, mold growth), many insurers require immediate leak detection and drying following a claim, which is frequently also covered as an insured cost item.
Full Value Insurance (Vollwertversicherung)
Synonyms: Vollwertversicherung
In full value insurance, the sum insured equals the full insured value of the insured object, so that no underinsurance can generally arise in the event of a claim.
Concept
In full value insurance, the sum insured is set so that it always corresponds to the full, current insured value of the insured object (e.g. replacement value or actual cash value). The aim is that, in the event of a claim, the full loss up to the object’s actual value is indemnified without any reduction for underinsurance.
Adjustment Mechanisms
Since the insured value of an object (e.g. a building) can change continuously over time due to price increases, structural alterations, or depreciation, full value insurance is often combined with a sliding index mechanism (e.g. a construction cost index) that automatically adjusts the sum insured periodically, thereby avoiding creeping underinsurance.
Distinction from First Loss Insurance
Unlike first loss insurance, where the policyholder chooses a freely selected, generally lower sum and thereby accepts a possible shortfall in the event of a major loss, full value insurance offers more comprehensive, but generally more expensive, protection, as it covers the object’s full risk exposure.
Supply Pipes (Water Damage Cover)
Synonyms: Service connection pipes
Supply pipes carry fresh water or gas into a building; breakage damage to them inside the building is typically covered under the escape-of-water peril.
Scope of cover
Breakage damage to supply pipes inside the insured building is typically covered under the escape-of-water peril. Supply pipes located outside the building but still on the insured premises can be added for an extra premium; pipework beyond the property boundary is generally outside the building owner’s insurance cover.
Key point of dispute
Utility companies sometimes attempt to shift their maintenance and repair obligations for supply pipes onto building owners through unilaterally declared “gifts” of the pipework. Such declarations are legally ineffective, since a gift requires acceptance by the recipient; responsibility for maintenance therefore frequently remains a matter of dispute.
Practical relevance
In property insurance, the precise scope of supply-pipe cover – particularly its extent outside the building – should be clearly defined in the contract to avoid coverage gaps for water damage losses.