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.
History
An 18th-century fire insurance contract.
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 ,
The first property insurance company still extant was founded in 1710 as
the 'Sun Fire Office' now, through many mergers and acquisitions, the RSA Insurance Group.
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
Attack on the World Trade Center
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.
In May 2007 New York Governor Eliot
Spitzer announced more than $4.5 billion would be made available to rebuild
the 16-acre (65,000 m2) WTC complex as part of a major
insurance claims settlement.
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. State Farm had proposed a 47.1% property insurance rate
increase for Florida policyholders.
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
Perils covered
The following causes of loss are covered:
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Exclusions
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.
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