Property insurance

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. 

Types of Coverage

There are 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.

Property Insurance Claims

World Trade Center case

Following the terrorist attacks of 11 September 2001, a jury deliberated insurance payouts for the destruction of the World Trade Center. Leaseholder Larry A. Silverstein sought more than $7 billion dollars 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 Gov. 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 their insurers of bad faith and failing to properly and promptly adjust their claims. Insurance companies changed their pricing policies after Katrina, with most policyholders 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, Fla. Gov. 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.

Ted Corless, who has represented large insurance carriers like Nationwide, remarked on State Farm's pullout from Florida to an Orlando television news station:

"I think that homeowners are really going to have to look out for themselves," Corless said.

Five days following Crist's veto of the Consumer Choice Act, Corless defended property insurance deregulation on WFLA's AM Tampa Bay, when he pointed out, "If the blue-chip insurance companies wanted to price themselves out of the market, then they'll go out of business."

“The governor says he’s protecting the consumers’ choice but, in reality, he’s making it for them,” Corless added. “In a free market, all companies would be available to property owners and if a homeowner doesn’t like the price, he or she moves on. This veto limits those options and ties the hands of the blue-chip companies.

In 2006, the average Florida annual insurance premium was $1,386 for a home owner, one of the highest in the country.