What Home & Auto Insurance Coverage Do We Really Need?

[phil1ben]

Something I find interesting is when companies value a home they include the total value of the house including the dirt. Think about it... the company says your house is valued at $150k so you should insure for that amount. But lots in my area might sell for $10,000 or 20,000. So even if you experience a complete loss (think of those folks out west that have gone thru a wild fire) the dirt is still there with various improvements water, waste, ect.

This has not been my experience. Our homes are insured with Chubb (we pay more.....) but they are re-appraised every third year (at my request and free of charge) and the appraisal does not include the "dirt". What the appraisal does value is the cost to rebuild the house as it exists, NOT the market value. Chubb insures replacement value not the lesser of replacement value or market value. Having said that I always felt the appraisal was about 15% high.

So why do I pay more for Chubb? I myself questioned this for years until Hurricane Sandy. We suffered damage to our beach house and Chubb quickly paid the estimate WE obtained no questions asked. My personal belief is that you have insurance for catastrophic events. As a result we keep very high deductibles ($20,000.00). But when you need it.......you need it and Chubb was there. Many people spent years trying to collect from the others.

We also have investment properties at the beach (multi-family units that we rent) that Chubb does not (will not) insure. One was totally destroyed. For those properties we had to fight the fight and hire an adjuster. It was well worth the money hiring the adjuster but made me understand the difference between carriers. You have insurance so it is there when you need it. If you never need it, $1.00 of premium is too much. If you need it, and the catastrophic event occurs, you will be happy you went with a reliable carrier. Don't just base your decision on premium but ask your neighbors who have suffered a loss how difficult it was to resolve a claim. There is more to this decision than how much you pay each year in premium.

As an aside, I also did not like the annual increases. So when ACE bought Chubb a few years ago I bought the stock and the dividends help pay my premiums. The price appreciation has also been great.

 

[MBSC]

Something I find interesting is when companies value a home they include the total value of the house including the dirt. Think about it... the company says your house is valued at $150k so you should insure for that amount. But lots in my area might sell for $10,000 or 20,000. So even if you experience a complete loss (think of those folks out west that have gone thru a wild fire) the dirt is still there with various improvements water, waste, ect.

The insured value is the cost of debris removal of the old house, landfill fees associated with debris removal, preparing the lot for a new structure, and building a new similar sized house to current code.

As someone who has actually exercised their home owner policy, (lost it ALL to a wildland fire) I want to remind everyone of a few facts regarding home owner insurance and coverage.

1. You do not insure a home for it's value. You insure for the cost it takes to replace the home. In a fire, flood, tornado for example, that means the cost to clean up and get the lot ready for building. On my property, I spent nearly $100,000 to clean up due to all the toxic materials from the fire, the removal of the burned trees on our property including soil compaction after the tree root balls were removed. We had to replace our septic tank and leach field because the tree roots destroyed them when the root balls were yanked out of the earth with the excavator. There is a lot more in the cost than an appraised value of a home ready to sell compared to the cost to replace a destroyed home on a damaged lot.

2. Contents insurance should be somewhere around 70% of the home's appraised value. This will be enough to replace everything and be sure you have full replacement cost at today's cost for new items.

3. 'Other structures' includes stuff like patios, driveways, fences, outbuildings, basically any improvement on the land that is NOT the house. It adds up folks. In our case, we had an aluminum pontoon boat in the driveway. It melted. Aluminum melts at around 1900 degrees. The concrete it melted onto has moisture in it. The moisture turns to steam at 212 degrees. The steam pressure puts millions of micro fractures into the concrete. So, while you may think your drive way or garage pad or patio surface are o.k., they are not and will need to be demolished (at a cost), sent to a recycling center (also at a cost and is considered hazardous materials and can not go into landfill), then plans drawn (at a cost), permits paid (at a cost), inspections(at a cost) It's not enough to think a driveway is worth 'X' number of dollars in the value of a complete home listed for sale when it's been destroyed and must be removed, redesigned, repermitted, reinspected and reinstalled

3. Loss-of-use covers not only rent or place to stay while your home is being rebuilt, but one that is of equal quality of what you had. And not just the structure, but the loss of use of every personal property until you have replaced the item. If you lost a TV, this portion covers the cost of a TV to use until you are financially reimbursed for the one you lost.
It usually has a 2 year limitation. It doesn't have a dollar value limitation. What ever the cost that is incurred to provide you a loaner until you are paid for your losses, doesn't come out of the pot of money taken to replace the house. For us, they found us a home of equal or better quality, size and furnished it down to the last fork and spoon. They even restocked the toilet paper and tissue boxes. Placed a washer and dryer and a bottle of laundry soap. Bars of soap at each sink. Etc....

I highly recommend having a contractor quote you on what it would cost to clean up your lot in a disaster and replace it for a cost basis when deciding how much insurance you should have, then add at least 10% to that for any appreciation over the next 2 to 3 years when you should evaluate the costs anew.

I'd never wish a disaster of any kind on anyone, but I do wish that people understand the underlying costs of what it takes to sit back down in front of your TV, with a beer from your fridge in your house. It's so much more than just an appraised value of the undamaged home's value.
http://www.early-retirement.org/forums/f26/homeowners-insurance-premiums-83140.html#post1771425

 

[scrabbler1]

I have had my car insurance policy through State Farm for 30 years. In that time, my rates have increased and decreased several times. In those early years, my rates dropped as I aged out of the highly rated youthful driver classes and into older driver classes, especially after I turned 25. They also dropped as I hit certain accident-free plateaus after 5 years, 10 years, etc. And just when I though I had hit the last of those, State Farm introduced a new one so my rates dropped some more.


But my rates also rose over the years. When I bought a new car, my rates rose, of course. When I moved out of my parents' house many years ago, I lost both he lower rated territory they lived in but also the multi-car discount I had by having my car registered at their address with theirs. Six years ago, I increased the liability limits on my car, so my rates rose.


General loss experience can put upward pressure on rates. But let's give credit to the insurance companies and law enforcement agencies who, in the early 2000s cracked down on insurance fraud rings who were staging accidents to collect insurance money. Rates for liability and No-Fault spiked for a few years before dropping around 2006.


I also have made sure to take an accident prevention course every 3 years which saves me 10% on most of the coverages on my policy. The amount of the discount and the coverages it applies to can vary from state to state. Here in New York, this course and its discount are available to driers of all ages, not just those over 55 or 65. So, for $50 and 6 hours of my time every 3 years, I'd save $400 over 3 years.


When my previous car became very old (13 years, probably should have done it sooner), I dropped Collision. I kept Comprehensive because it is cheap and provided me coverage for things not directly related to the car's declining value such as towing & labor and glass coverage. With regard to glass coverage, I suggest buying a full-coverage-glass option even though that costs a few extra dollars. From my 23 years working in the actuarial field in personal auto insurance industry, glass claims tend to be high-frequency, low-severity events.


I also moved my homeowners policy from another company to State Farm so I could get a multi-line discount, saving me money on both the homeowners and auto policies.

 

[GTFan]

So I made sure I had a umbrella plan to cover a high law suite. To keep my premiums low I have $5K deductible on the house and $500 on cars. If you drive older cars, like we do, then you might want drop the comprehensive and/or collision coverage to self coverage your cars.

We do all of this with USAA, but they do require a $100k/300k/500k liability policy for auto (property/bodily injury) to get their umbrella. They are not that competitive on homeowner's but beat the pants off of just about everybody with auto, and once you get the multi-line discounts and the great claim service (not that I've used them) they are tough to beat. I volunteer with an independent insurance broker and she says there's no way she can touch their rates.

But yeah just like everyone else they go up every year.

 

[REWahoo]

We do all of this with USAA, but they do require a $100k/300k/500k liability policy for auto (property/bodily injury) to get their umbrella. They are not that competitive on homeowner's but beat the pants off of just about everybody with auto, and once you get the multi-line discounts and the great claim service (not that I've used them) they are tough to beat.

Especially when you factor in the annual distribution you get from your USAA Subscriber Savings Account. We've been averaging $200 to $300 per year each December, which is a nice little Christmas bonus.

And it really gets sweet when, as a 40 year USAA member, you qualify for the SSA Senior Bonus. Since 2012 I've been getting an additional $800 a year in distributions. That really lowers our insurance costs.

 

[pb4uski]

This has not been my experience. Our homes are insured with Chubb (we pay more.....) but they are re-appraised every third year (at my request and free of charge) and the appraisal does not include the "dirt". What the appraisal does value is the cost to rebuild the house as it exists, NOT the market value. ....

The insured value is the cost of debris removal of the old house, landfill fees associated with debris removal, preparing the lot for a new structure, and building a new similar sized house to current code.

+1 Insured valued does not include "dirt" as poster erroneously claimed, but may include cost of removing debris and preparing site for rebuilding. I've been over this in detail in determining coverage for a commercial rental property I manage for my Mom.

 

[bradaz2488]

At a risk of finding out I'm pay too much here are my "hard" numbers. All of our policies are with State Farm. We have 3 cars with all the same coverage options: $250k/$500k bodily injury and $100k property damage. Comprehensive & collision w/ $500 deductibles. Emergency road service & car rental. Total cost for all 3 cars is $1800/year. If we were to drop the comprehensive & collision coverage on all 3 cars it would save us ~$500/year. Homeowner policy has $517K on dwelling, $388K on person property and 1M personal liability with a $5000 deductible. Cost is $838/year. House is worth around $420K and I know we do not have even close to $388k in personal property, but they said this was based on the value the house and we could not adjust this amount. We also have a 1M umbrella policy which combined with our auto & home gives us 2.2M total coverage. this cost us $187/year....

 

[GTFan]

Especially when you factor in the annual distribution you get from your USAA Subscriber Savings Account. We've been averaging $200 to $300 per year each December, which is a nice little Christmas bonus.

And it really gets sweet when, as a 40 year USAA member, you qualify for the SSA Senior Bonus. Since 2012 I've been getting an additional $800 a year in distributions. That really lowers our insurance costs.

That's weird, we don't have this account but have only had insurance with them for maybe 7-8 years now (when they opened it up to all former enlisted military). Was this an old feature for officers that was discontinued?

 

[Nords]

That's weird, we don't have this account but have only had insurance with them for maybe 7-8 years now (when they opened it up to all former enlisted military). Was this an old feature for officers that was discontinued?

Heh. USAA opened up membership to all ranks (and vets) in 1996. Today there are still servicemembers & veterans who haven't seen the word. USAA has found that the best way to reach them is through the football game ads with the halftime "Salute To Service" ceremonies.

The Subscriber Savings Account is the way that a mutually-owned insurance company holds financial reserves for its members, but the SSA rules get complicated pretty quickly. You might be able to see this PDF brochure without logging in, and you can search for it after logging in. [-]I've also attached it as a file.[/-] Edit: *
https://content.usaa.com/mcontent/s...Distrib_Broch_Panels.pdf?cacheid=4107505308_p

The fine print says that it's only for members with property & casualty policies, and those policies have to be with USAA (not an affiliate like Progressive). I've also heard that family members of military servicemembers & vets (like adult children and others who've joined under USAA's expanded membership rules) might not have a SSA, but I haven't been able to confirm that restriction with USAA.

* Nope. "Your file of 7.51 MB bytes exceeds the forum's limit of 2.00 MB for this filetype."

 

[exnavynuke]

We do all of this with USAA, but they do require a $100k/300k/500k liability policy for auto (property/bodily injury) to get their umbrella. They are not that competitive on homeowner's but beat the pants off of just about everybody with auto, and once you get the multi-line discounts and the great claim service (not that I've used them) they are tough to beat. I volunteer with an independent insurance broker and she says there's no way she can touch their rates.

But yeah just like everyone else they go up every year.

I had the exact opposite experience with USAA's rates. I have homeowners with them because they were competitive but they've been at least 10% higher on auto insurance for me every time I've gotten quotes from them.

 

[gerntz]

Another good reason to live in a cheap home or rent.

 

[GTFan]

We messaged USAA about the SSA and found out that it only applied to officers that were assigned to the main USAA insurance mutual. Later enlisted were assigned to a separate USAA mutual that has its own dividend return policy (which has never happened).

So if you're an officer with USAA insurance you're getting better rates than everyone else because of the yearly SSA returns.

 

[rodi]

I hate the insurance racket - but I participate because I don't want to go bare....

When we bought our house from my father I tried to get quotes prior to closing and found that many insurance companies would not cover us because we back to an open space canyon. I asked my dad who he had and he said AAA. I called them and they said they wouldn't cover us because of the canyon. I pointed out they were CURRENTLY covering the house for my dad. They agreed that since it was a blood relative, family transfer, and no claims while my dad owned, and I had a clean insurance record, they'd cover us.

When we built our granny flat they refused to write a course of construction policy - so we go that as a separate policy from Farmers, informing AAA of this additional coverage. (It's all one parcel.) When the granny flat was completed and my in-laws moved in AAA agreed to cover it as an "accessory building".

Later we converted it to a rental (vs family living there). We knew we needed an umbrella policy as well. AAA first refused to write the rental unit policy... then finally did - but then they refused to write the umbrella. I spent over a week talking to various folks... turns out it was the original issue of being on a canyon... even though nothing had changed - they'd been covering the location for decades. They said they still write the home and care insurance... but not the rental or umbrella.

This started the arduous search for *anyone* who would write an umbrella and rental - complicated by the fact the rental is on the same parcel as our primary.

It turns out the Farmers agent that wrote our course-of-construction policy was willing to write the bundle.

Shopping around for price doesn't work when you live in a fire zone.... You look for *anyone* who's willing to write the policy.

 

[brucethebroker]

A wise man told me when I was a young grad "your insurance is only as good as your agent".

I have been with the same agent (big name national company) for over 30 years. My agent is a former claims adjuster for that company (very valuable experience, IMHO). I have had two "iffy" house claims (one roof, one broken pipe) and both needed his help to get approved. I don't even shop around-knowing the claims will be paid is much more important.

One man's opinion...........