Another house insurance question

[imoldernu]

This may be a little bit tougher. Am really seeking help.

Here's the scenario. Have never paid much attention to insurance until now.
House is almost the same (within 15K) of all the similar homes in our CCRC. The current value, based on Zillow, and recent selling prices that I know about , is about $180K. My current insurance shows the insured price as $249K. When I question the agent, the answer is that's the estimated rebuild.

So... here's my situation. I only expect to get the current value for my house, as within a few years, we'll move to the apartments in our CCRC. It seems as if I can't insure for the value I place on the house. If It burns to the ground, I'd have the lot cleaned. No reason to rebuild.

If I'm willing to insure for just the current value, it looks like the company will not approve a policy. Also... the current policy covers almost $200K for belongings. Our plan for selling was to junk all the furnishings and present the home as empty for resale, when we move.

Down to the nitty gritty... and nothing to do with my situation... Why wouldn't an insurance company be willing to specify coverage limits, if the home owner is willing to give up coverage... ie rebuild, belongings, jewelry etc. In other words, why can't the home owner determine the amount of coverage he would be willing to subsidize.

Is all this written in stone? Would love to hear from someone in insurance, but all help is welcome. Thanks.

[SunBlueSky]

Just a few thoughts:

1)Whether you are happy with your current insurance agent, or are open to other quotes

2)Actual Cash Value policy - below is from an insurance info site with a partial definition:
https://www.thetruthaboutinsurance.c...ers-insurance/

"Your home’s ACV is its depreciated value at the time of a loss, so obviously it can change over time.
You may opt to purchase this type of home insurance policy if you are not “in for the long haul” with regard to your current residence.
Since you will receive the depreciated value of your home if there’s a total loss, you would not likely have enough money to rebuild the structure the way it was…you’ll get a check from the bank, but not for an amount large enough to rebuild."

[MrsHaloFIRE]

USAA overvalues houses as a rule. I tell them no twice, they say ok and let me lower it. And we love on until renewal when they rinse and repeat. Have you told them no...pause pause... No?

[skipro33]

Most policies are for replacement costs. It can easily cost half again as much as the house would market for to rebuild. Just the clean-up cost of the lot could run 10's of thousands. Then there's the permit fees and any other fees the county is going to charge. When a neighborhood is built, the efficiency of building several houses at once is realized. Even though the exact same house is reproduced in the loss, it's still a 'custom' home as it is being built one at a time.

It's impossible to just walk away with an insurance check on a total loss. After all, the land still exists and there are laws that require the mess to be cleaned up in a safe and expedient manner.

[aja8888]

Get some other quotes. You can do this over the phone with an insurance broker or with a company directly.

[RobbieB]

I think it would cost more to rebuild than it would sell for. Wreckage needs to be cleared and the scope of work (build 1 house) results in a higher cost than a whole development (build 100 houses)

[RetireAge50]

Timely thread. Just yesterday called my insurance to discuss exactly what you described. In my case was insured for $679k for a $500k house.
They said they automatically increase it every year to cover inflation and such. Since I have been here 17 years it got out of whack. They ran it through their computer and said I really only need insurance for $279k. I guess this might make sense as the land, foundation, driveway, etc. won’t burn.
This reduced my annual premium from $1,200 to $500.

[Bamaman]

What is being talked about here is the mode of operation for replacement value homeowner's insurance. Such insurance rates are charged by the $ thousands. Many insurance companies will quote new customers a low price to get their homeowner's policy, but they most often require insuring all the homeowner's personal automobiles.

The premiums will drift up every year to correspond with increasing costs of rebuilding the property. Some company supposedly monitors building costs and projects the cost of replacement construction in every market--and this is what the future premiums are based upon. Look up 5 years later and the premiums are being charged for twice the cost of rebuilding (in most markets).

The fallacy is that the insurance company will pay to rebuild the home in the case of a total loss. But if you choose to purchase an existing home and not rebuild, they'll only pay you a depreciated amount that may be one third less than the cost of rebuilding. But you've been paying the big premiums for years--not on the depreciated amount.

I have been changing insurance companies about every 5 years in order to start at what my home is worth--and not the inflated prices. Keeping losses low, a great FICO score and a good driving record is required to change companies this way.

I guess you could say the insurance industry sucks.

[zinger1457]

Been happy with Travelers as far as cost and coverage goes, haven't filed any claims. Just got my renewal bill and it's $13 less than my first policy with them 7 years ago. They increase the dwelling value by a small amount every year, along with personal property, etc. Seems to be adequate for replacement in my area, the policy also includes a '25% additional replacement cost' option.

[Katsmeow]

Quote:

Originally Posted by RetireAge50 Timely thread. Just yesterday called my insurance to discuss exactly what you described. In my case was insured for $679k for a $500k house. They said they automatically increase it every year to cover inflation and such. Since I have been here 17 years it got out of whack. They ran it through their computer and said I really only need insurance for $279k. I guess this might make sense as the land, foundation, driveway, etc. won’t burn. This reduced my annual premium from $1,200 to $500.

Do you live in an area where the value of your $500k house is significantly in the land value? Sometimes that does happen. But, otherwise, I would be concerned with an insured value of $279k on a $500k house No, the land would stick exist after a fire. But, it normally cost much more to build a house than what you could sell the existing house for.

A few years ago I owned an acre of land and was considering building a new house on the land. I worked on plans and the last pricing I looked at was around $400k. This was not for really wonderful finishes and involved lots of compromises.

Around that time, I found another house that was about 6 years old. It was 20% bigger than the house I was going to build. It had as good or better finishes. It was also on an acre of land. We ended up paying just under $300k for that house (with the land -- remember the $400k to build didn't include the cost of the land). So, let's say my $300k house had burned up. I know it would have cost more than $400k to rebuild it, probably over $450k.

So if someone told me I could rebuild my $500k house for $279k I would really wonder about that. I would check and make sure that they would be talking about a house of comparable quality and finishes to what I had.

[pb4uski]

Quote:

Originally Posted by imoldernu This may be a little bit tougher. Am really seeking help. Here's the scenario. Have never paid much attention to insurance until now. House is almost the same (within 15K) of all the similar homes in our CCRC. The current value, based on Zillow, and recent selling prices that I know about , is about $180K. My current insurance shows the insured price as $249K. When I question the agent, the answer is that's the estimated rebuild. So... here's my situation. I only expect to get the current value for my house, as within a few years, we'll move to the apartments in our CCRC. It seems as if I can't insure for the value I place on the house. If It burns to the ground, I'd have the lot cleaned. No reason to rebuild. If I'm willing to insure for just the current value, it looks like the company will not approve a policy. Also... the current policy covers almost $200K for belongings. Our plan for selling was to junk all the furnishings and present the home as empty for resale, when we move. Down to the nitty gritty... and nothing to do with my situation... Why wouldn't an insurance company be willing to specify coverage limits, if the home owner is willing to give up coverage... ie rebuild, belongings, jewelry etc. In other words, why can't the home owner determine the amount of coverage he would be willing to subsidize. Is all this written in stone? Would love to hear from someone in insurance, but all help is welcome. Thanks.

I ran into something like this a few years ago with my Mom's commercial building where the insurance agent and I had different ideas about the cost to rebuild if we had a total loss. I forget the term that he used but the jist was that if the insurer thought that we were under insuring the building that they would only pay a portion of the claim... in your case they would pay 180/249 or 72%. It might well be that if your home were completely destroyed that it would cost more than the value of the property less the value of the land to replace what you had. What I would advise is to research what the cost to rebuild might be and use that as the insurable value. You could then hike your deductibles to be really high... as high as possible... and see what sort of premium savings that creates.

Secondly, $200k for contents is totally ridiculous... so I would see if you can reduce that or at least what their rationale is.

What you might also do is to talk with some neighbors and see what companies they use and what their coverage limits are for structure and contents and if one of your neighbors has a more sensible deal then contact their agent for a quote.

[Stormy Kromer]

Quote:

Originally Posted by imoldernu This may be a little bit tougher. Am really seeking help. Here's the scenario. Have never paid much attention to insurance until now. House is almost the same (within 15K) of all the similar homes in our CCRC. The current value, based on Zillow, and recent selling prices that I know about , is about $180K. My current insurance shows the insured price as $249K. When I question the agent, the answer is that's the estimated rebuild. So... here's my situation. I only expect to get the current value for my house, as within a few years, we'll move to the apartments in our CCRC. It seems as if I can't insure for the value I place on the house. If It burns to the ground, I'd have the lot cleaned. No reason to rebuild. If I'm willing to insure for just the current value, it looks like the company will not approve a policy. Also... the current policy covers almost $200K for belongings. Our plan for selling was to junk all the furnishings and present the home as empty for resale, when we move. Down to the nitty gritty... and nothing to do with my situation... Why wouldn't an insurance company be willing to specify coverage limits, if the home owner is willing to give up coverage... ie rebuild, belongings, jewelry etc. In other words, why can't the home owner determine the amount of coverage he would be willing to subsidize. Is all this written in stone? Would love to hear from someone in insurance, but all help is welcome. Thanks.

Because 99% of Homeowners claims are for partial losses, not total losses. If a hailstorm destroys your roof, siding and windows and it costs $75,000 to repair it costs the insurance company the same to fix it if your house is insured for $500,000 or $300,000. They require the house to be insured to value to generate premium to cover the exposure for partial losses.

Whatever you do, keep Replacement Cost coverage on your policy. Avoid Actual Cash Value policies even if it means insuring the house for more than you think it's worth. Here's an example for your house. Say you have a fire that doesn't total your house. The estimated cost is $300,000 and you have it insured for $250,000, Actual Cash Value. The insurance company pays you $250,000, less depreciation which could easily cut it in half, and you've got an old house to either tear down or fix out of pocket. If you have it insured for $500,000 Replacement Cost the insurance company fixes it for you without depreciation and you've got a like new house to sell. If you want to save premium raise your deductible and remove some little optional coverages that won't break you (refrigerated foods, jewelry riders....) Also, once you start moving out of your house make sure that you still meet the requirement so that it is not vacant. Once a house is vacant many coverages are removed and the company may not be willing to insure it at all.

Nobody likes insurance, but if there was a way to do it better and still make money, everybody would be doing it.