After a fire, flood, burglary, earthquake or other such events, there is obvious destruction, loss or damage to buildings, plant and stock. This physical loss or damage is commonly insured under a Material Damage policy. The purpose of Material Damage insurance is to reinstate the asset lost or damaged, as it was if no fire or other insured event had occurred. The insured may elect not to reinstate and can negotiate a financial settlement, which would reflect a depreciated reinstatement value. However, the insurer is not liable under the policy unless the property is insured property and the insurer has accepted a valid claim for the damage. Material Damage Insurance is the modern form of fire & perils insurance. It is superior because of its broadness of coverage, meaning that if it is not excluded then it is covered. The policy also provides accidental type coverage and is adaptable to extend and limit coverage as required.
Three of the common extensions to a Material Damage policy are: