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How much should I insure the dwelling for on my house?
Old 03-18-2009, 06:49 PM   #1
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How much should I insure the dwelling for on my house?

My insurance company bumps up the limits & liability amount on my dwelling a significant amount every year. The amount on my dwelling is about what my house would sell for. Does this seem kind of high compared to the norm? Should I factor in the cost of land and the foundation and have them lower it?
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Old 03-18-2009, 07:00 PM   #2
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I try to insure mine for the replacement cost of the building. This assumes it's built on the existing land and foundation. Think of the risks. If your house burns down, land & foundation don't. If you are in an earthquake zone, then foundation and land may be gone. YMMV
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Old 03-18-2009, 07:05 PM   #3
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I try to insure mine for the replacement cost of the building. This assumes it's built on the existing land and foundation. Think of the risks. If your house burns down, land & foundation don't. If you are in an earthquake zone, then foundation and land may be gone. YMMV
Yeah, I'm thinking along the same lines. The land is worth about 20% of my house so I don't think it makes sense to insure the dwelling for 95%.

My personnel property is also way too high so I'm going to lower that too. I don't want to be underinsured but it seems like some (most?) insurance company over insure to increase profits.
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Old 03-18-2009, 09:10 PM   #4
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I have been considering reducing my home owner insurance. Now that I have less to be liable for, maybe I should have less insurance for it. Any thoughts on this aspect?

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Old 03-19-2009, 12:41 AM   #5
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I considered this issue, reviewed my policy and contacted the insurer. They explained my policy covers Dwelling (based on sq ft and type of construction), Other Structures (decks, porches, driveway, garden shed, etc.), Personal Property (contents) and Loss of Use...............so the lot is not even covered. Insurer assumes some risk that the lot and utilities utilities won't suffer much damage even if the dwelling is completely destroyed. Replacement cost rider is in place to cover things like demolition.

I think it depends on the value of land in your area, assuming replacement construction cost varies much less than the property itself. My property tax assessment is 34% land/ 65% improvement. My dwelling coverage is 80% of the total assessment and market price.

I guess the other option would be to match the coverage to the mortgage if you have one, but the policy is less than .2% of assessed value.
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Old 03-19-2009, 06:34 AM   #6
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Never insure land. But it is important to have a clause that keeps things like "code changes" insured. The older your home gets the more the codes change and to comply with those codes upon rebuilding is mandatory. Helpful, to have a clause that keeps the insured amount relatively constant with the change (usually up) in costs to replace - especially, if you want to leave the coverage on "auto-pilot".
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Old 03-19-2009, 07:04 AM   #7
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I considered this issue, reviewed my policy and contacted the insurer. They explained my policy covers Dwelling (based on sq ft and type of construction), Other Structures (decks, porches, driveway, garden shed, etc.), Personal Property (contents) and Loss of Use...............so the lot is not even covered. Insurer assumes some risk that the lot and utilities utilities won't suffer much damage even if the dwelling is completely destroyed. Replacement cost rider is in place to cover things like demolition.

I think it depends on the value of land in your area, assuming replacement construction cost varies much less than the property itself. My property tax assessment is 34% land/ 65% improvement. My dwelling coverage is 80% of the total assessment and market price.

I guess the other option would be to match the coverage to the mortgage if you have one, but the policy is less than .2% of assessed value.
Thanks, those percentages are helpful.

It seems like the best way to determine the amount is to estimate the construction costs of rebuilding. That's kind of tough to predict so I'm going to base my estimate off of home value.

I think I'm going to lower the dwelling and remove the additional personal property amount today, but also take out an umbrella policy and increase my auto just a bit.
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Old 03-19-2009, 11:54 AM   #8
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I have tried to lower my dwelling coverage without success. What my house will sell for consists of land plus a 37 year old structure with components in various stages of "decay". The ins co only insures the house part. But the dwelling coverage will pay to replace my house with all brand new materials plus remove the old destroyed house (in case of wind or fire total destruction). They told me after sending out an estimator that my house would cost a certain amount to rebuild and that is what the insurance coverage will have to be with them.

I wouldn't necessarily assume that the foundation would remain intact and in serviceable condition after a catastrophic loss. Depending on age of house, foundation type, and other factors, you could have differential settlement (such as if your foundation sits on clay) or other reasons (including code differences) such that the foundation would have to be redone.



Disclaimer: None of this is intended to be advice of a professional nature and I have to admit that I have no particular experience in this field and as such am not able to give professional advice in this area. Please consult a licensed home inspector or engineer competent in this field for specific questions.
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Old 03-19-2009, 12:05 PM   #9
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Better to be over insured than under insured. Because if you're determined to be under insured by 50% - for example - then any claim will only be covered at 50% of the damage.
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Old 03-19-2009, 01:31 PM   #10
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Thanks, those percentages are helpful.

It seems like the best way to determine the amount is to estimate the construction costs of rebuilding. That's kind of tough to predict so I'm going to base my estimate off of home value.

I think I'm going to lower the dwelling and remove the additional personal property amount today, but also take out an umbrella policy and increase my auto just a bit.
My Unbrella REQUIES a certain level (300K?) of liability on BOTH the house and car(s).
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Old 03-19-2009, 01:40 PM   #11
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I've never insured the land on any property I've ever owned. My brother was in real estate, and the best good advice he ever gave me. Why waste money?
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Old 03-19-2009, 01:52 PM   #12
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My Unbrella REQUIES a certain level (300K?) of liability on BOTH the house and car(s).
Mine too. I have it covered for the house but will need to bump up my car just a bit. I figure it's worth it for peace of mind and worst case scenarios.
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Old 03-19-2009, 02:04 PM   #13
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They told me after sending out an estimator that my house would cost a certain amount to rebuild and that is what the insurance coverage will have to be with them.
I'm guessing they won't but I might ask to see if they'll send an estimator out to my house.

Overall, I haven't been thrilled with my insurance company because it seems like they try to up sell you more than give you honest advice. I might talk to a local company and get another quote.
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Old 03-19-2009, 07:14 PM   #14
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IMO, insurance should be used to cover catrostrophic damages. You don't insure land but the foundation, concrete slab with PVC pipes, etc., basements and the like may be damaged beyond repair and have to be demolished. Same for condo's above the first floor. Everyone thinks they are safe from hurricanes; however, if there is a big tidal surge, it might undermine the pilings and the entire building may have to be torn down. Get with an insurance agent you can trust and ask them a lot of questions. Also, deductibles can get confusing (like hurricane).
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Old 03-19-2009, 08:38 PM   #15
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Overall, I haven't been thrilled with my insurance company because it seems like they try to up sell you more than give you honest advice. I might talk to a local company and get another quote.
I got good rates through my credit union as well as through GEICO. Some offer multiline discounts if you insure car, house, umbrella, etc at the same insurance company.
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