Jeffrey Wade
Perpetual homeowners insurance is an insurance product that returns all your money when you cancel your policy. Unlike other insurance companies, perpetual insurance companies make money on the interest from customer deposits, not premiums. In 2015, Green Tree Perpetual Assurance Co., one of the oldest insurers with roots in the 1700s, went out of business. However, Baltimore Equitable Insurance, which has been in business since 1794, offers perpetual homeowners insurance in Maryland and Pennsylvania.
| Characteristics | Values |
|---|---|
| Companies selling perpetual homeowners insurance | Green Tree Perpetual Assurance Co., Baltimore Equitable Insurance |
| States where perpetual homeowners insurance is available | Maryland, Pennsylvania |
| Cost structure | One lump sum at the start, small yearly payments as the value of the home increases |
| Refund policy | Full refund of the deposit if the policy is cancelled, even if there have been claims |
| Rate changes | Locked-in rate that does not increase with claims |
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What You'll Learn
Baltimore Equitable Insurance: Maryland and Pennsylvania
Perpetual homeowners insurance is a type of insurance policy that never expires. Once purchased, the policyholder has coverage until they decide they no longer need it and cancel the coverage. Baltimore Equitable Insurance is one of the oldest insurance companies in the United States, offering perpetual insurance to homeowners, renters, and condo owners in Maryland and Pennsylvania since 1794.
Baltimore Equitable Insurance operates under the regulations of the Maryland Insurance Administration and the Pennsylvania Insurance Department. The company issues standard policies, but with the key difference being that all payments are fully refundable. When a customer purchases a perpetual policy, they make a deposit, and in return, Baltimore Equitable Insurance provides coverage. If the customer decides to cancel their policy, Baltimore Equitable Insurance refunds their entire deposit.
The geographic limitation to Maryland and Pennsylvania allows Baltimore Equitable Insurance to keep prices affordable for its customers. By only operating in these two states, the company can rate its customers based on events occurring in those specific regions, avoiding the cost burden associated with higher-risk areas of the United States. This business model has allowed Baltimore Equitable Insurance to prosper for over 200 years, indicating the company's financial stability and conservative nature.
Baltimore Equitable Insurance offers a unique approach to insurance by treating customer payments as assets. Any money paid to the company remains the customer's money, which can be returned in full upon cancelling the policy. In contrast, traditional insurance companies consider premiums as expenses, which are used to pay their expenses and policyholders' losses. With Baltimore Equitable Insurance, customers can rest assured that their money stays intact and is immediately returned when coverage ends.
In addition to homeowners insurance, Baltimore Equitable Insurance also offers a Condominium Unit Owners policy and a Renters policy, both of which are perpetual and have fully refundable deposits. The company can provide insurance for rental properties and vacation homes located in Maryland or Pennsylvania, as long as they are rented to not more than two families for private residential purposes.
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Green Tree Perpetual Assurance: Philadelphia, New Jersey, Delaware, Maryland, Ohio, Pennsylvania
Perpetual insurance policies differ from standard insurance policies in that they are an asset for the policyholder. Any money that you pay to a perpetual insurance company is still your money, and you are simply putting it to work for you and receiving insurance coverage in return. When you no longer need coverage, the money is returned to you.
The Green Tree Perpetual Assurance Company, founded in 1784, was one of the oldest insurers in the United States with roots in the 1700s. It was one of the only companies that sold perpetual homeowners insurance policies until it went out of business in 2015. Green Tree was based in Philadelphia and wrote homeowners insurance in the Philadelphia area, as well as parts of New Jersey, Delaware, Maryland, Ohio, and Pennsylvania.
The company was founded as the Mutual Assurance Company for Insuring Houses from Loss by Fire by a group of sixty-one men who wished to make fire insurance available to those who wanted to have trees in front of their houses. The company's archives, which include financial accounts, correspondence, histories, cancelled insurance surveys, and policies, are held by the Historical Society of Pennsylvania and date from 1784 to 1995.
Green Tree Perpetual Assurance was acquired by the National Grange Mutual Insurance Company of Keene, New Hampshire, in 1996. It was later acquired by the Penn Mutual Insurance Company of West Chester. However, in 2003, when Harleysville Mutual Insurance Company acquired Penn Mutual, Green Tree was excluded from the purchase. Unfortunately, Green Tree was unable to generate sufficient investment returns to remain viable, and the company's policies terminated in 2015.
Another company that offers perpetual homeowners insurance is Baltimore Equitable Insurance, which has been in business since 1794.
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Perpetual insurance benefits
Perpetual insurance is an insurance product that offers coverage for your home and also has benefits for your bank account. Unlike ordinary homeowners insurance, there are no yearly premiums, and you get all your money back when you cancel your policy.
With perpetual insurance, you pay a one-time upfront deposit based on the value of your home, and you are covered perpetually after that. The only other payments you need to make are small yearly payments to cover the increase in the value of your home, but these are also at your locked-in price when you took out the policy. This means that your insurance rate will never go up, no matter how many claims you make.
For example, a house that costs $150,000 may typically be charged an annual premium of $1,000 for a term policy. That same house would likely require a $10,000 single deposit premium for a perpetual insurance policy of equivalent coverage. A person in the 28% tax bracket would need to earn $1,389 in gross income to pay the annual premium. This amount no longer needs to be paid annually, and the tax-adjusted rate of return on the deposit premium is 7.89%.
Perpetual insurance is offered by a limited number of companies, including Baltimore Equitable Insurance, which serves Maryland and Pennsylvania, and Green Tree Perpetual Assurance Co., which serves the Philadelphia area and parts of New Jersey, Delaware, Maryland, Ohio, and Pennsylvania.
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Perpetual insurance costs
Perpetual insurance, also known as "insurance for life", is a type of insurance policy that does not have a fixed term and covers the insured for their lifetime. It is an alternative to traditional term insurance, which requires the policyholder to pay regular premiums for a fixed period.
Perpetual insurance policies require a one-time payment, often a large sum, at the beginning of the policy. This payment is a deposit that covers the cost of insurance for the entire duration of the policy. The deposit is refundable if the policy is cancelled, even if there have been claims made. The benefit of this type of insurance is that policyholders avoid the annual expense of term insurance premiums, which can increase over time.
For example, a house that costs $150,000 may typically be charged an annual premium of $1,000 for a term policy. That same house would likely require a $10,000 single deposit premium for a perpetual insurance policy of equivalent coverage. A person in the 28% tax bracket would need to earn $1,389 in gross income to pay the annual premium.
Baltimore Equitable Insurance, one of the oldest insurers in the United States, offers perpetual insurance policies. A policyholder mentioned that they were quoted around $15,000 for the initial deposit, and most other people with policies pay around $300-$500 every few years to increase their coverage level as inflation and construction costs rise. Another policyholder with a $140,000 home was quoted $5,600 for perpetual insurance, while their current annual premium with Erie is $1,150.
Perpetual insurance policies may also require occasional additional deposits to maintain coverage at 100%. These deposits are optional but are necessary to ensure that the policy coverage amount does not drop below 80% of the estimated rebuild cost, at which point the policy would convert to Actual Cash Value instead of Replacement Cost.
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Perpetual insurance policies
Baltimore Equitable Insurance, in business since 1794, is one of the notable companies offering perpetual homeowners insurance policies. They operate in Maryland, as well as Pennsylvania, providing coverage for homes, condos, and apartments. The upfront deposit for a policy with Baltimore Equitable Insurance ranges from $15,000 to $17,000, depending on endorsements and additional coverage. The rate is locked in at the time of purchase, and any money paid to the company remains an asset for the policyholder, earning a rate of return.
Another historic insurer offering perpetual homeowners insurance was the Green Tree Perpetual Assurance Co., founded in 1784. Green Tree, based in Philadelphia, served the Philadelphia area and parts of New Jersey, Delaware, Maryland, Ohio, and Pennsylvania. Unfortunately, in 2015, Green Tree announced it was going out of business due to financial difficulties, returning deposits to its policyholders.
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Frequently asked questions
Unlike ordinary insurance companies, perpetual insurance companies give you all your money back if you ever decide to cancel your policy. They make money on the interest from customers' deposits, not the premiums. So, the deposit you pay stays intact and when your policy ends, the company refunds your money in its entirety.
Perpetual homeowners insurance is available to all homeowners in Maryland and Pennsylvania. Baltimore Equitable Insurance is one such company that offers perpetual policies.
Perpetual homeowners insurance offers several benefits. Firstly, there are no yearly premiums; you pay one lump sum at the start based on the value of your home, and you're perpetually covered after that. The only other payments are small, yearly payments as the value of your home increases. Your insurance rate will never increase, regardless of the number of claims you make.
