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Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or boiler insurance. Property is insured in two main ways—open perils and named perils.
Open perils cover all the causes of loss not specifically excluded in the policy. Common exclusions on open peril policies include damage resulting from earthquakes, floods, nuclear incidents, acts of terrorism, and war. Named perils require the actual cause of loss to be listed in the policy for insurance to be provided. The more common named perils include such damage-causing events as fire, lightning, explosion, and theft.
Property insurance can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his new plan for London in 1667". A number of attempted fire insurance schemes came to nothing, but in 1681, economist Nicholas Barbon and eleven associates established the first fire insurance company, the "Insurance Office for Houses", at the back of the Royal Exchange to insure brick and frame homes. Initially, 5,000 homes were insured by Barbon's Insurance Office.
In the wake of this first successful venture, many similar companies were founded in the following decades. Initially, each company employed its own fire department to prevent and minimise the damage from conflagrations on properties insured by them. They also began to issue 'Fire insurance marks' to their customers; these would be displayed prominently above the main door to the property in order to aid positive identification. One such notable company was the Hand in Hand Fire & Life Insurance Society, founded in 1696 at Tom's Coffee House in St. Martin's Lane in London.
In Colonial America, Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly Property insurance to spread the risk of loss from fire, in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin's company refused to insure certain buildings, such as wooden houses, where the risk of fire was too great.
Types of Coverage
There are the three types of insurance coverage. Replacement cost coverage pays the cost of replacing your property regardless of depreciation or appreciation. Premiums for this type of coverage are based on replacement cost values, and not based on actual cash value. Actual cash value coverage provides for replacement cost minus depreciation. Extended replacement cost will pay over the coverage limit if the costs for construction have increased. This generally will not exceed 25% of the limit. When you obtain an insurance policy, the coverage limit established is the maximum amount the insurance company will pay out in case of loss of property.
This amount will need to fluctuate if homes in your neighborhood are rising; the amount needs to be in step with the actual value of your home. In case of a fire, household content replacement is tabulated as a percentage of the value of the home. In case of high-value items, the insurance company may ask to specifically cover these items separate from the other household contents. One last coverage option is to have alternative living arrangements included in a policy. If a fire leaves your home uninhabitable, the policy can help pay for a hotel or other living arrangements.
US Property Insurance Claims
World Trade Center case
Following the September 11 attacks, a jury deliberated insurance payouts for the destruction of the World Trade Center. Leaseholder Larry A. Silverstein sought more than $7 billion in insurance money; he argued two attacks had occurred at the WTC. Its insurers—including Chubb Corp. and Swiss Reinsurance Co.—claimed the "coordinated" attack counted as a single event. In December 2004 the federal jury decided in Silverstein's favor.
Post-Hurricane Katrina property insurance claims
In the wake of Hurricane Katrina, several thousand homeowners filed lawsuits against their insurance companies accusing them of bad faith and failing to properly and promptly adjust their claims. Insurance companies changed their pricing policies after Katrina, with most policy holders in New Orleans seeing their property insurance premiums double after the storm, and deductibles increase by two, or even three, fold. The losses from Katrina severely impacted both the affordability and coverage amounts provided by property insurance, even in regions that were not impacted by the hurricane.
Florida Consumer Choice Act
On June 24, 2009, Florida Governor Charlie Crist vetoed the Consumer Choice Act (H.B. 1171). The bill would have trumped state regulation, and allowed Florida's biggest insurance companies to establish their own rates. State Farm Florida expressed its disappointment with Crist's veto of the bill the company said "would have given consumers more options in their choice of a property insurer. It would have attracted more capital to the property insurance market in Florida". State Farm had proposed a 47.1% property insurance rate increase for Florida policyholders. As a result of Crist's move, State Farm plans to drop coverage for more than 700,000 homeowners by 2011.
Remarking upon State Farm's pullout from Florida, Ted Corless, a property insurance attorney who has represented large insurance carriers like Nationwide, noted "that homeowners are really going to have to look out for themselves". Five days after Crist vetoed the Consumer Choice Act, Corless defended property insurance deregulation by pointing out that "if the blue-chip insurance companies wanted to price themselves out of the market", then they would go out of business. He accused Crist of making choices on behalf of consumers, not protecting their right to choose. In 2006 the average Florida annual insurance premium was $1,386 for a homeowner, one of the highest in the country.
Fire insurance in India
Fire insurance business in India is governed by the All India Fire Tariff that lays down the terms of coverage, the premium rates and the conditions of the fire policy. The fire insurance policy has been renamed as "Standard Fire and Special Perils Policy". The risks covered are as follows:
- Dwellings, offices, shops, hospitals:
- Industrial, manufacturing risks
- Utilities located outside industrial/manufacturing risks
- Machinery and accessories
- Storage risks outside the compound of industrial risks
- Tank farms/gas holders located outside the compound of industrial risks
The following causes of loss are covered:
The following are excluded from insurance coverage:
- Loss or damage caused by war, civil war, and kindred perils
- Loss or damage caused by nuclear activity
- Loss or damage to the stocks in cold storage caused by change in temperature
- Loss or damage due to over-running of electric and/or electronic machines
Claims In the event of a fire loss covered under the fire insurance policy, the insured shall immediately give notice thereof to the insurance company. Within 15 days of the occurrence of such loss the insured should submit a claim in writing giving the details of damages and their estimated values. Details of other insurances on the same property should also be declared.
- Hamburger Feuerkasse, world's oldest fire insurer.
- Dickson (1960): 4
- Dickson (1960): 7
- Hand in Hand Fire & Life Insurance Society
- Adjusting Today The Replacement Cost Claim
- Levine, Greg. "Silverstein: WTC Leaseholder May Collect Up To $4.6B" Forbes 6 Dec. 2004 http://www.forbes.com/2004/12/06/1206autofacescan06.html
- Bagli, Charles. "Insurers agree to pay billions at Ground Zero." New York Times 24 May 2007 http://www.nytimes.com/2007/05/24/nyregion/24insure.html?ei=5124&en=2e2ed8e5e6afab5f&ex=1337745600&partner=permalink&exprod=permalink&pagewanted=print
- Fox News 11 July 2006 First Hurricane Katrina Homeowner's Insurance Lawsuit Begins
- CNN Money 28 August 2008 Katrina survivors mired in taxes and red tape
- Disaster Recovery Today A Second Disaster Strikes: Will FEMA Pay Again?
- Fox News 11 June 2006 Insurance Disputes Delaying Gulf Coast Rebuilding
- St. Petersburg Times "Crist rejects bill that aimed to lure property insurers to Florida"http://www.tampabay.com/news/politics/gubernatorial/article1013056.ece
- State Farm - Florida
- South Florida Business Journal "Appeals court upholds State Farm rate hike rejection" http://southflorida.bizjournals.com/southflorida/stories/2009/07/20/daily34.html
- "Cancellation Clock Ticks For State Farm Customers". WESH.com. 7 October 2009. Retrieved 28 September 2012.
- Insure.com (2009-03-12). "How do your home insurance rates compare with others?". Insure.com. Retrieved 2011-10-07.
- All India Fire Tariff http://www.tac.org.in
- As per tariff wordings adopted by all insurers