Debris Removal Insurance: Meaning, History, Examples

What Is Debris Removal Insurance?

Debris removal insurance is a section of a property insurance policy that provides reimbursement for clean-up costs associated with damage to property.

Policies with a debris removal provision typically only cover debris resulting from an insured peril, such as charred wood or twisted metal from a building fire.

How Debris Removal Insurance Works

Debris removal insurance policies commonly have a cap on the amount of reimbursement that a policyholder can receive for debris removal costs. While policies typically have debris removal as a standard provision, the policyholder is often able to purchase additional coverage. The policy provision may also extend to the removal of hazardous materials that may cover the property but could exclude pollutants.

When calculating the many costs involved with repairing and replacing property after destruction or damage, the costs of removing the debris and cleanup are in addition to—rather than a part of—the value of the damaged property. As such, the impact on the total amount of the loss, and the coverage limitations on these costs in most standard property insurance policies, are frequently overlooked in arranging the coverage initially.

Debris removal insurance coverage is usually offered as “additional coverage” rather than a part of basic property coverage. Coverage is usually limited to 25% of the insurer’s liability for the direct property loss by a covered cause of loss, plus applicable deductible (unless stated as otherwise in policy declarations).

A claim for debris removal is payable only if reported to an insurer within 180 days after the date of loss. Note that expenses must be reported, but not necessarily incurred, within that time. A contractor’s estimate should satisfy this requirement and it is important to get the full amount in writing to present to the insurer.

History of Debris Removal Insurance

Under the 1943 New York Standard Fire Policy and its predecessors, debris removal costs aren't mentioned as either covered or excluded. This gave rise to controversy, with some insurers routinely including these costs as a part of the claim settlement and others rejecting or resisting payment, contending that this cost was not a direct result of the loss, and, as such, not covered.

To clarify coverages, a debris removal clause was added to the forms attached to the standard fire policy. It simply stated that the coverage extended to include the cost of removal of the debris resulting from the property loss.

The debris removal coverage was within and did not increase, the limit of liability. Debris removal costs were not considered in determining compliance with the coinsurance clause of the policy; however, if a coinsurance penalty was found to apply, reducing the recovery of the property loss, customary adjustment practice was to apply the same limitation to the payment for debris removal.