I read an article today about a company that is offering an insurance property to protect property owners against losses incurred as a result of the state's power of eminent domain. I had to check my calendar to see if it was April Fool's Day. I think this is probably the most useless type of insurance I have ever seen... and its not cheap! (see Underwriter Launches Policy to Protect Against Eminent Domain).

For less than $300 per year, the policy provides up to $200,000 loss of market value when the home is sold, plus up to $50,000 to relieve the expense of moving as a result of eminent domain...

The company claims that this was developed in response to the U.S. Supreme Court decision in Kelo v. New London. In that case, the Supreme Court held that a state could use its eminent domain power to take property from a homeowner and give it to a private developer for economic redevelopment. The decision was so alarming that state legislators across the country began working on legislation that would protect their constituents from such takings. Some have been more successful than others, but the backlash from the Kelo decision likely means that this type of taking will be more difficult in the future.

What exactly does this insurance cover? When the state exercises its eminent domain power, they are required by the constitution to compensate the homeowner. That usually means they must pay fair market value. The policy provides up to $200,000 for loss of market value, but how is that measured? Presumably, the loss of market value would have to be attributable to the eminent domain action which will result in a payment of fair market value to the homeowner. Plus the policy will pay up to $50,000 for moving expenses.

The odds of losing your home to eminent domain seem very slight and the payout on such a policy will likely be very limited. Yet, the premium seems fairly expensive at about $300 per year. Of course, the company offering the coverage has exactly the opposite opinion.

[The Ward Group LLC] said the policy offers more than real protection, it provides “peace of mind.”

“When you consider the value and limits of coverage provide and the relatively low premium amount, we are confident a high percentage of homeowners will elect to purchase the coverage,” said Ward.

My advice would be to buy a lottery ticket - your odds of winning the lottery are probably better than having your home seized by eminent domain and it will only cost you $1.00.