Legal entities or private persons may insure their property if they have an insurable interest in it i.e. where they may benefit by the safety of insurable property, or may be prejudiced by its loss or by damage thereto. The owner of insurable property has an insurable interest in respect of the full value thereof. Where the assured has no interest at the time of the loss, he cannot acquire interest by any act or election after he is aware of the loss.
At assured’s discretion property may be insured for market value or replacement value. In many cases actual market value is equal to replacement value. Sum insured should not exceed the actual market value when the insurance is effected.
In consideration of premium insurers offer basis cover to protect property against deterioration of its value due to physical damage (PD) as a result of combination of risks FLEXA — Fire, Lightning, EXplosion, Aircraft impact. On a separate basis insurers may offer cover against additional risks: flood, earthquake, war risks, terrorism and others.
Businesses often insure their industrial property for business interruption (BI). In combination with basic cover (PD+BI) it implies for full insurance cover.