Covered Loss

What You Need to Know

All four criteria must be met for a loss to be covered.

Common covered perils under standard property policies include fire, lightning, explosion, windstorm, hail, theft, vandalism, water damage from burst pipes, and smoke damage.

Common exclusions (not covered losses) include flood (requires separate flood insurance), earthquake (requires separate coverage), intentional acts, wear and tear, and neglect or deferred maintenance.

Why It Matters for Restaurant Owners

Understanding what constitutes a covered loss is crucial because not all losses are insured. The difference between a covered and non-covered loss can mean receiving hundreds of thousands of dollars in insurance money or paying for damages entirely out of pocket.

Common misconceptions:

• "Property insurance covers all property damage" — false, only covered perils apply
• "Liability insurance covers all lawsuits" — false, numerous exclusions apply
• "If I have insurance, I'm protected" — only for covered losses meeting all criteria

A burst pipe inside your building is a covered loss; a river flood entering the same building is excluded unless you carry separate flood insurance — identical water damage, completely different financial outcome. Read your policy's covered perils and exclusions sections, and ask your agent about gaps in coverage before a disaster happens, not after.