Insurance Aha!

[nwsteve]

We recently downsized and moved across the state. In the process some jewelry that we had covered with a rider never arrived.
Put in a claim and learned it does not matter what your coverage says, you will only get what the insurance company can replace what they view as comparable property at THEIR price.
While on the surface this may not seem unjust. HOWEVER. I have been paying the premium on the retail value it had been appraised at--approx 2.5 times what is now being offered.
A nice chat with local jeweler (has the "high-end" shop in our small town and is the designated "replacement jewler" for the insurance company)reveals he has to disclose cost and the insurance company allows him a markup that is 75% of his usual markup. This is the value I am being offered--which is incidently about a third of the value I am paying a premium.
So for any of you paying insurance premium on itemized peronal property you may want to consider asking your local jeweler what he would replace it for under an insuarance claim and save some premium dollars!
Best for the New Years

[free4now]

Yeah, jewelry appraisal is a bit of a racket. Many jewelry stores will guarantee that what they will sell appraises for double the retail price. Some even guarantee it will appraise for triple. So I figure the actual efficient-market value of a piece of jewelry is around a quarter of the appraised value. Another approach is to look for completed sales on ebay if the jewelry is a commodity like a diamond.

[Nords]

I wonder if all insurers follow that practice. What company is your policy with?

Our personal-property coverage has two parts-- a generic "replacement value" policy with a max of $70K, and a "high-value items" rider for specific articles valued at over $500. The high value stuff is mainly rings & Lladro.

When we've had claims on the replacement value portion of the policy, we've received a check for the pro-rated value. If we choose to buy the replacement and send in the receipt, we get a second check for the remainder of the replacement cost.

I'll have to ask Armed Forces Insurance how they handle the cost of replacing the high-value items.

[nwsteve]

Nords
We are with State Farm. Based on my conversation with the "Replacment jeweler", it sounds like the treatment is pretty common with the insurance companies.
BTW, the claim was on homeowner policy rider for high value items that had been professionally appraised and then listed in the rider.
My mistake was not understanding that Appraised Retail Value has nothing to do with recovery value. Bottom line was I was paying premiums on twice the value I need to pay for.
Nwsteve

[brewer12345]

I don't understand why you had the coverage in the first place. Property coverage is a huge racket and unless we are talking about the Hope diamond or your house, it is hard to imagine any property loss that would seriously impact a FIREd person.

[Nords]

Originally Posted by nwsteve

We are with State Farm. Based on my conversation with the "Replacment jeweler", it sounds like the treatment is pretty common with the insurance companies.
BTW, the claim was on homeowner policy rider for high value items that had been professionally appraised and then listed in the rider.
My mistake was not understanding that Appraised Retail Value has nothing to do with recovery value. Bottom line was I was paying premiums on twice the value I need to pay for.

Originally Posted by brewer12345

I don't understand why you had the coverage in the first place. Property coverage is a huge racket and unless we are talking about the Hope diamond or your house, it is hard to imagine any property loss that would seriously impact a FIREd person.

This is eye-opening. My first thought was to discuss the situation with AFI, but now I think spouse and I are going to discuss cancelling our property insurance altogether. After two decades' experience I can predict the typical marriage discussion-- financial analysis vs emotional attachments. We're gonna have to see how far that dialogue gets at the multi-carat wedding ring and the two-foot-tall Lladro.

Perhaps property insurance has a place when you're just starting out and can't absorb a flood or a house fire. As I look around me, though, at furniture that's been through 19 changes-of-station moves and could be replaced on Craigslist for about 40 cents on the dollar...

That reminds me of a story. During our 1997 move back to Hawaii the shippers lost a couple boxes of my paperback books. I can't even remember the authors (since then I've cut way back to just one whole wall of paperbacks) and I was loathe to replace them. AFI sent us a $50 check for the pro-rated value of the books and said, per our replacement-value coverage, that they'd pay up to another $500 when we replaced them. I asked AFI if the books had to be the same titles or if it could be any $500 of books. AFI said they didn't care and (politely) to stop pestering them about such a pittance.

So we invited our kid's school librarian to go shopping with us. She had a wonderful time at the local Scholastic Books warehouse and she filled a pickup truck. It was the first time I'd ever heard of Harry Potter or noticed that Scholastic was a publicly-traded stock, which ended up making far more money than we lost (and more than AFI paid out).

[Nords]

Well this is fun. NOT.

Spouse and I decided to drop our personal property coverage along with all the full-replacement-cost and high-value riders. The house is furnished in "Early Ready To Assemble" and "Tropical Craigslist" that we can handily self-insure. We don't collect anything valuable (except stocks). So the decision to drop the insurance was pretty straightforward.

AFI, OTOH, has their knickers all knotted up. Apparently our home primary residence has an HO-3 policy, which is defined to include (among other things) extensive personal property coverage. Canceling our personal property policies would, in AFI's view, require changing our homeowner's policy from HO-3 to HO-2 or HO-1. This is a bit confusing to me because the cover sheet of the alleged HO-3 policy says, in bold font, "THIS POLICY DOES NOT PROVIDE PERSONAL PROPERTY COVERAGE" and the title page says ""Homeowners 2 Broad Form". I think AFI has their records a bit out of order. AFI says they'll investigate & explain to me why I'm wrong report.

Fine, whatever... but AFI is reluctant to write "new" coverage in states that are surrounded by hurricanes, tsunamis, and lava flows. Apparently our attempt to save a couple hundred bucks in annual premium payments for personal property will give them the excuse they've been waiting for to drop a "high risk" client off the homeowner rolls. (I say "high risk" because in 25 years we've submitted three whole claims totaling less than $3500.) USAA has already "indefinitely suspended" writing Hawaii coverage since the beginning of 2006.

So everyone's going to consult with their underwriters (who may be, judging from the customer service rep's tone of voice, like Dilbert's accounting trolls only worse) and get back to us.

"What do you do all day" indeed. I'm beginning to gain a tiny, worm's eye glimpse of what most people go through for health insurance...

[nwsteve]

Brewer
You are absolutely correct and I should have cancelled years ago. The premium was never large enough to trigger action--about 100/yr. Always came separate from our homeowners. We originally had the items appraised and itemized when we returned from the Far East at the advise (who else) of the insurance agent.
Had we not moved and had all the policies re-rated to our new address I would not probably thought of it. The loss during the move just added some insult to injury :P
One of the reasons for posting my very late Aha was to hopefully save others the folly
nwsteve

[wabmester]

Originally Posted by brewer12345

I don't understand why you had the coverage in the first place. Property coverage is a huge racket and unless we are talking about the Hope diamond or your house, it is hard to imagine any property loss that would seriously impact a FIREd person.

We added a computer rider to our policy. With several laptops in the house + dogs + cat + kid, I felt the risk of a broken LCD was pretty high. IIRC, the coverage was around $1 per $100 of coverage with no deductible, which was less expensive than the similar warranty coverage offered by the manufacturer. I only do this for the first year or two of ownership, since the computers depreciate so quickly.

[sailor]

Originally Posted by wab

We added a computer rider to our policy. With several laptops in the house + dogs + cat + kid, I felt the risk of a broken LCD was pretty high. IIRC, the coverage was around $1 per $100 of coverage with no deductible, which was less expensive than the similar warranty coverage offered by the manufacturer. I only do this for the first year or two of ownership, since the computers depreciate so quickly.

Wab, instead of doing this consider buying computer equipment with a credit card which doubles warranty period like Gold/Platinum Amex Skymiles or Amex Blue. In addition to doubled warranty you get either miles or cash back.

[cute fuzzy bunny]

I think i'll keep my insurance.

Most of my furniture would look better after it had caught fire, so I'm thinking i'd get a pretty good deal out of a settlement.

We've got the rider on the wifes engagement ring. It'd cost about $22k to replace and I cant believe that stone stays in the setting. I forget the stat I saw but its something like 15-20% of engagement rings are lost, stolen or lose their stone. Seems worth the hundred or so a year.

My best insurance aha was raising my liability limits through the roof, increasing my total coverage, then putting in huge deductibles. I'm at 2500 on the cars and 5000 on the house. I self insure for the small stuff and get great coverage for about half the cost it used to be.

[wabmester]

Originally Posted by sailor

Wab, instead of doing this consider buying computer equipment with a credit card which doubles warranty period like Gold/Platinum Amex Skymiles or Amex Blue. In addition to doubled warranty you get either miles or cash back.

Good advice, but the insurance rider will cover stuff (like a kid-induced broken LCD or cat pee in the keyboard) that most manufacturer warranties don't cover. You can often buy comprehensive "d'oh!" coverage directly from the manufacturer, but it's more expensive than a rider on your home policy, in my experience.

[sailor]

Originally Posted by wab

Good advice, but the insurance rider will cover stuff (like a kid-induced broken LCD or cat pee in the keyboard) that most manufacturer warranties don't cover. You can often buy comprehensive "d'oh!" coverage directly from the manufacturer, but it's more expensive than a rider on your home policy, in my experience.

wab,
what's your deductible on a rider, that it's worth to worry about LCD?
For us it would not work - our deductible is $2500 and I think the most expensive piece of electronics I have in the house is a boat stereo worth probably $200.

[wabmester]

Originally Posted by sailor

what's your deductible on a rider, that it's worth to worry about LCD?

Large deductible on the traditional home owner's policy, but the computer rider has no deductible. Like I said, we have several laptops + dogs + cat + kid. I live in a high-risk home.

[Nords]

Well, it took over three weeks, a half-dozen phone calls, a couple e-mails, and a formal letter ass-covering request. AFI had a lot of trouble making the paradigm shift, but we insisted on dropping our personal property coverage so here's what they decided they could do for our annual premiums:
$784 New homeowner's policy with no embedded liability or personal property coverage
$63 Basic liability to replace the old embedded liability coverage
$847 Total

We got rid of:
$279 Personal property coverage with fliers, floaters, & whatever
$964 Old homeowner's policy with embedded liability & personal property coverage
$1243 Old total

for $396 savings. We have the same limits of homeowner's (minus the "storage shed"), the same deductibles, the same hurricane coverage (with its deductible), and the same umbrella liability policy. Except now we're paying a lot less money. If we get wiped out next hurricane season we'd probably refurnish the house for under $15K via Craigslist, eBay, and "Thank goodness we don't have to take care of that anymore".

It's interesting to note that my first estimate of our savings was only $279/year. However when we started digging into the "No sir you can't" pushback it turns out that AFI hides includes a lot of "extra" coverage in their broadest homeowner's policy.

As we were cleaning the files I came across an old AFI letter from 1999. It encouraged us to get a grip on our personal property, including a paragraph that says: "By studying thousands and thousands of total claims, the insurance industry has found that the 'average' policyholder will have unscheduled personal property values worth about one-half of the dwelling insurance amount. Since your home is insured for $340K this would imply that the value of your personal property is about $170K. Currently, your coverage is only $65K."

Apparently their logic is valid in all markets, no matter how expensive the land may be. Today our home appraises at $900K so by AIF's reasoning our personal property, eight years older, must be worth $450K. Moving to Cleveland would wipe out over $300K of our net worth.

NWSteve, thanks for starting this thread and waking us up to this scam issue!

Dory, this was one of the more profitable posts I've read this year. There's a little extra for the server fund coming your way...

[clifp]

I am always tempted to pay of my mortgage just so I cancel the ridiculous insurance policies.
I have a concrete house 1000' above sea-level why do I need Hurricane insurance?

My general philosphy is you are better off investing the insurance premium in insurance companies for any coverage less than catastrophes.

[Moemg]

Less than $1000 in Hawaii and over $6000 in Florida for homeowners insurance .How does that make sense ? Don't we have the same risks ?

[brewer12345]

Originally Posted by Moemg

Less than $1000 in Hawaii and over $6000 in Florida for homeowners insurance .How does that make sense ? Don't we have the same risks ?

Apparently not.