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Benjamin Franklin: From Founding Father to Father of Home Insurance

You’ve probably heard of Benjamin Franklin, or at least recognized his face on the $100 bill– we all know that great smile of his, don’t we?

We could talk about how the name is on bridges, streets and institutes, but with his face stamped on American currency, the symbol of the world’s largest economy, we cannot overstate his relevance. 

Benjamin Franklin (1706-1790) is one of the Founding Fathers of the United States. He helped draft the Declaration of Independence in 1776 and was present during the Fourth of July that changed the country’s history. In addition to his political and diplomatic endeavors, he was an author, editor, scientist, and inventor.

Did you know that in addition to revolutionizing the country and his study of electricity and meteorology, Ben Franklin was fundamental to the creation of the insurance market in the USA?

Benjamin Franklin and 18th Century Philadelphia

“To live is to face one problem after another.”

Benjamin Franklin

England has had a property insurance company since the 17th century. However, in the US, the colonies only became prosperous and sophisticated enough for this type of protection in the second part of the 18th century.

The city of Philadelphia at the time was one of the largest cities in North America and had a population of 15,000. The houses were mostly built close together and were made of wood, which is a great recipe for catastrophic fires.

In 1730, the worst fire in Philadelphia’s history began on a wharf along the Delaware River. It burned down the shops on the wharf, and the fire spread across the street, destroying three more homes and causing extensive damage.

In his local newspaper, the Pennsylvania Gazette, Franklin wrote that because of the climate on the night of the fire, the fire could have been contained if those present had had firefighting tools. It was then that the Common Council of Philadelphia ordered the importation of equipment from England.

America’s first insurance company

Franklin’s recommendations eventually led to the formation of Philadelphia’s first volunteer fire brigade, the Union Fire Company, in 1736. So many men wanted to join that other volunteer brigades were created.

In 1751, Franklin and members of the brigade began to meet periodically with firefighters from other brigades to discuss, design, and present an insurance bill.

All those interested in subscribing to the service were instructed to sign a Compensation Agreement. Initially, more than 70 Philadelphians became subscribers. On April 13, 1752, the subscribers elected a Board of Directors and a Treasurer, which met for the first time in May of the same year.

At that meeting, underwriters agreed to establish an insurance company by the name of The Philadelphia Contribution for the Insurance of Houses from Loss by Fire, and agreed to “be and continue to be equal contributors and sharers in losses as well as in gains.”

Policyholders had to hang metal “fire marks” on their homes, which are a kind of metal shield, that helped to identify the insured properties. Many homes in Philadelphia still have fire marks on their facades.

Image: Philadelphia Encyclopedia

The four holding hands represent the community’s mutual help in case of fire.

The policies were valid for seven years and after expiration, the premium money could be returned with some exceptions. Losses from fire and company expenses were paid with money taken from a proportional contribution from each policyholder.

The insurance company in action

As it is today, substandard homes were denied insurance. Unprotected ovens, chimneys in need of maintenance, inadequate materials or difficult-to-access construction were part of the insurance’s exclusions. Chimney sweeps hired by the company and Franklin’s own lightning rod helped drastically reduce the occurrence of fires.

The security measures created and implemented by the Philadelphia Contributionship not only saved lives and homes, they also changed the city’s architecture. The streets became wider, bricks and stones began to be used more commonly in construction.

The insurer’s first year passed without any occurrences. The first fire in an insured house happened in 1753 and the damage was great. Benjamin Franklin was happy to report in the Gazette that the damage was repaired immediately, at no extra cost to the owner. Nearly a third of the Society’s assets were used.

The Philadelphia Contributionship and the Fire Department

Over time, the Contributionship’s assets grew and the money was invested in other mortgages, bonds, and stocks. Donations to volunteer fire brigades, especially those that responded to fires with the company’s brand, were frequent.

Although volunteer firefighters responded to all fires, either by having to choose between two or to work harder, the Society-branded buildings used to be more advantageous.

Firefighters were often members of The Contributionship. That is, the less damage to a building, the less deducted from your own premiums. However, if a house was not insured, the fire would be put out anyway.

After all, the inhabitants of Philadelphia had already understood, by that time, that the city’s growing economic well-being depended on the well-being of all its citizens. Allowing fires that could spread and become even bigger fires was in no one’s interest. When a citizen suffers, everyone suffers.

However, high fire risk companies, such as pharmacies and breweries, were uninsured or insured at significantly higher rates. This opened space for the creation of other competing insurers. However, the company created by Franklin continues to open its doors today.

Now it’s your turn!

In the middle of the 18th century, the properties were being built to stay, and the population of Philadelphia understood the importance of protecting these properties. It was necessary to create safety measures against fires, unite society for the emergence of collective home insurance and develop awareness about prevention.

Today, we have everything within our reach. With one click, you can simulate an insurance policy, request a review of the policy you have, ask questions via whatsapp and follow up on safety tips for your property and your family.

Be like Ben Franklin and look for fair, solid insurance that covers all the risks that your home might have. Speak with one of our agents and we will be more than happy to discuss with you every coverage option available and how we can help protect your home from imminent dangers.

Luciana Sá

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