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Insurance company decided our house was worth $100k more this year
Old 12-23-2009, 01:01 PM   #1
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Insurance company decided our house was worth $100k more this year

I got our homeowners insurance renewal bill for next year and the premium was up 30% despite no claims, no change in coverage, and no renovations. It turns out Progressive Home Advantage increased our limit from $200k (what the house was purchased for and what its currently worth) to $300k. $100k increase in a single year - would be great news if they were willing to buy it for that!

So I called them and they said they switched software that was being used to calculate replacement cost, the new software provides the correct estimate. I pointed out that a similar house down the street is on the market for $200k...why would they spend $300k to rebuild our house? They said if your house burns down they have to pay demolition costs... $100k of demolition costs? I checked our appraisal from 2 years ago and the replacement cost estimate was $100/sq foot, but our insurer thinks it should be $150/sq foot. Maybe there was some inflation, but not 50% inflation in this economy! Last time I checked, real estate construction services were not in such high demand...

They wouldn't let me reduce the coverage, so I filed a complaint with the state insurance regulator - let them explain their bogus estimates to them. If they don't get some satisfaction we'll switch insurers.
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Old 12-23-2009, 01:03 PM   #2
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homeowners insurance is the biggest racket when it comes to this kind of thing.... i used to go thru it every year, but finally got a company that hasnt pulled the same stunt in a few years
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Old 12-23-2009, 01:17 PM   #3
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This happened to me (though not a 50% increase - only 10% or so annually). Materials and labor costs are down in my locality. The structure is all they insure, not the land. In most policies, they usually allow roughly 50% additional cost above the insured amount for things like demolition, site clearance/haulage, etc related to getting the lot back into buildable shape.

And the "insured amount" (on my policy at least) is replacement coverage for the house, not what it would cost to buy a "used" and depreciated house next door. As an example, my roof and siding may be 20 years old and nearing the end of their useful lives, but the insurance policy would replace these with brand new materials.

For what it is worth, I'm insuring a value that is roughly double what my structure is "worth" as-is. Value of structure being defined as estimate of open market sale price minus estimate of land price for the lot. I tried to point out that 5 brand new houses that went in 4 doors up from me and roughly the same size as my house all sold for less than what I'm paying for insurance on my structure and I'm sure they are nicer inside and out vs. my circa 1972 finishes and fixtures.

It's an ugly racket but luckily a very small expense for us (we shop the policy every year).
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Old 12-23-2009, 01:24 PM   #4
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The insurance companies always do this bull that is why I start at the lowest amount they will let me insure a house for, they will go up anyways.
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Old 12-23-2009, 01:38 PM   #5
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What I hate is that sometimes, unless you accept their inflated "estimate" of the rebuilding cost of your home, they will not offer the rider that covers overages.

For example, my insurance company tried to say our 1150 square foot house in an area with moderately low construction costs had an insured value of $150,000. This despite the house probably being worth $90-100K in my estimation (and $15-20K of that is the land). But if I didn't accept their $150K valuation and insisted on (say) $100K and it wound up costing $120K to rebuild, I eat the $20,000. But if I accept their value and there is a $20K overage, they would cover it.

I think it's a way to get you to buy more insurance than you need.
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Old 12-23-2009, 01:50 PM   #6
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I don't mind if my premiums go up from year to year, but a 30% increase in a single year is outrageous, and trying to sneak it in through the backdoor by jacking up my coverage is equally ridiculous.
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Old 12-23-2009, 01:51 PM   #7
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Quote:
Originally Posted by soupcxan View Post
I don't mind if my premiums go up from year to year, but a 30% increase in a single year is outrageous, and trying to sneak it in through the backdoor by jacking up my coverage is equally ridiculous.
Time to shop the policy. You can probably trim a couple hundred off the premium just by switching the policy. Not bad return on investment for a couple hours work. Get auto quotes while you are at it.
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Old 12-23-2009, 02:57 PM   #8
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Originally Posted by ziggy29 View Post
What I hate is that sometimes, unless you accept their inflated "estimate" of the rebuilding cost of your home, they will not offer the rider that covers overages.

For example, my insurance company tried to say our 1150 square foot house in an area with moderately low construction costs had an insured value of $150,000. This despite the house probably being worth $90-100K in my estimation (and $15-20K of that is the land). But if I didn't accept their $150K valuation and insisted on (say) $100K and it wound up costing $120K to rebuild, I eat the $20,000. But if I accept their value and there is a $20K overage, they would cover it.

I think it's a way to get you to buy more insurance than you need.


You also have a problem in your example that most people are not aware...

Say their number is $150,000

You insure for $100,000... this is insuring at the 67% level... so they consider that you are SELF INSURING the rest...

You now have a small fire... and the cost to fix it is $40,000... they will only pay $40,000 X .67% or $26,666.... you get to pay the difference...

My old agent told me you had to be above 80% of their value to not be considered you were self insuring...
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Old 12-23-2009, 03:08 PM   #9
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I just got an auto policy renewal - no claims or changes - but they hit me with a 15% increase. No reason. I'm challenging it. Drives me nuts.
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Old 12-24-2009, 11:32 AM   #10
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Your home is only worth $100K more this year if the insurance company is willing to buy it from you for that increased price.
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Old 12-24-2009, 11:33 AM   #11
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Originally Posted by Delawaredave5 View Post
I just got an auto policy renewal - no claims or changes - but they hit me with a 15% increase. No reason. I'm challenging it. Drives me nuts.
A lot of insurance rates are going up, largely because of poor investment performance and horribly low rates they are earning on cash reserves.
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Old 12-24-2009, 12:26 PM   #12
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It sounds like you need to shop around, if they can't change beyond what the new software is quoting. I recently called my auto insurance company to try and get a better rate if I combine my home insurance with them. Everything was looking good until the underwriting software. For the square footage of my house and the zip code, my minimum dwelling coverage would be $150,000 MORE than my current renewal coverage. I told him there’s no way! He said that was the minimum they could offer me, and I said no thanks!

I then called my current insurance company to see if my dwelling coverage was sufficient. She said it was, and they write lots of policies for Texas. She also told me in Texas you can pay for an option to have an additional 50% increase in coverage. So, for $32 more a year I have an additional 50% in dwelling coverage. I then proceeded to have my renewal policy reduced to last year’s amount since I will still be at $140,000 more then what my house appraised for a few months ago.
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