Homeowners Insurance/Replacement Cost

[blueriver]

I'm a little aggravated with my Insurance company and replacement cost.

I do not have a mortgage therefore if I elected I really would not have to purchase insurance ... But I like the security and I live in Tornado Alley.

Last April I got my bill and paid it in full ... yesterday I get a notice that my homeowners policy has a payment due. I send an email for an explanation.

Here is the response:

On 05/17/11 an inspection was done on the home. This is practice on all new business policies. At the time of the inspection it was determined that the dwelling coverages needed to be increased. This is to allow for a more accurate calculation of the estimated replacement cost in the event of a total loss. Replacement cost is not relevant to your mortgage amount, market value, etc. Market value is what a buyer would be willing to pay for your home in today痴 economy. Replacement cost is the amount needed to replace or repair your damaged property with materials of similar kind and quality without deducting for depreciation. Remember that our policies do not cover the land in which your property is located, and so our estimate of replacement cost does not reflect this. Overall the cost of rebuilding has been on the rise averaging 3% per year for the past decade

Soooo here's my thoughts ... where was I when this inspection took place? How did they get in? My entrance's ... one is locked and one has a keypad ??? "Practice on all new Business Policies" ???? I have been insured with them since I bought the peoperty and most certainly am not a "new business policy" ...

Also why can I not pick my amount of coverage? I do not need to satisfy a mortgage? Just satisfy myself and my wife ...They say I have to have $186K replacement cost ... I DON"T THINK SO !!! I am in the Real Estate profession and in todays economy ... well the entire farm would play hull bringing that in SE Oklahoma !! Besides that, their message stated it didn't cover the land just the home ... **** I wish they would cut the check for the home and get it out of here!!!!

Lets assume I want say $75K on the home ... in the event of a loss I would be the only party who would have to rebuild with that amount or put some towards it? Why and how can they dictate to me the amount of coverage I must have? What if I lost it and decided to put in a $50K double wide?

Well I'm fighting with them and was told if I do not pay by Feb. 1st a cancelation notice for non-payment will go out.

 

[Bird]

Good luck. Right now, I figure my tax appraisal at about 4.67% more than the place would sell for (using Zillow.com estimate of value). And the insurance company's appraisal, based on their cost to rebuild as you are saying, is 48.72% more than I figure the place would sell for, or 42.08% more than the tax appraisal. $174k rebuilding cost in my case. In other words, unfortunately, I don't think your situation is unusual and I'll be surprised if you win, but if you do, be sure to let us know how you did it, so I can do it, too.

It would seem logical that you could insure for whatever amount you want to, and in the event of a total loss, receive up to that amount, but that's not been the case, in Texas at least. If you insure for less than 80% of their estimated value, in the event of either total or partial loss, you can't even collect the amount you insured for. You get substantially less.

 

[dmccarty]

Talk to your state's insurance commission about the issue. We have talked to them several times and they have been very helpful. We have not always gotten the answer we wanted but at least we knew the rules/regs/laws.

Your situation is odd. Do you have an agent to talk to or just talking to whom ever picks up the phone at the 800 number?

Can you get better insurance cheaper or at the same cost from another company? We use Farm Bureau and they have been awesome for us. :thumbsup:

Later,
Dan

 

[wjmst]

Find another insurance company. I was with State Farm for about 16 years and never really looked into the insurance. This past summer I started to comparison shop. I was able to get BETTER insurance for about 25% less than what I was paying with State Farm.

State Farm tried to tell me I wasn't comparing apples to apples and asked to see the quotes for them to look over. I sent them the quotes and never heard another word about it, so I switched.

I try to be loyal as possible, especially to companies that treat me well, but don't rip me off, especially for 16 years!

 

[murphy1244]

Find another insurance company. I was with State Farm for about 16 years and never really looked into the insurance. This past summer I started to comparison shop. I was able to get BETTER insurance for about 25% less than what I was paying with State Farm.

State Farm tried to tell me I wasn't comparing apples to apples and asked to see the quotes for them to look over. I sent them the quotes and never heard another word about it, so I switched.

I try to be loyal as possible, especially to companies that treat me well, but don't rip me off, especially for 16 years!

Who did you end up with?? I've been with State Farm since 87 Now time to do some shopping. Tanx

 

[ultrarunner]

I'm by no means well versed in insurance... did pick up a few things being around my Grandfather that sold insurance.

It used to be a crime to blatantly insure in item for much more than fair market value... even fraud because it greatly exaggerated value leads to fraudulently claims.

Many companies now require the structure be fully rebuilt to collect the maximum...

Also... there is a theory that if the insurance carried will cover 75% of the cost to rebuild... then you are in effect 75% insured and this can be used to pay smaller claims... the 10k of damage might be reduced to a $7500 payout.

Also remember that in today's market it often does cost more to rebuild... building codes and the cost of demolition and disposal of the old structure are two big ones.

I have also found insurance to be anything but straightforward...

 

[ericrm2005]

Ill throw in my 2 cents worth here. I am an underwriter for a national ag property and casulaty insurance carrier. We dont do homeowners insurance, but it all works very similarly.

You should be able to choose from replacement cost, actual cash value, or stated amount. It sounds to me like you would like stated amount coverage. Insurance companies generally dont love to do stated amount, but you SHOULD be able to find someone to do that.

If you are covered for replacement cost as of now, it is important that you and your insurance company come up with what you think the house is worth and agree on it. Coinsurance will come into play if and when you have a claim. If you arent insured up to the value that your insurance company determines the property is worth, you will be only paid a portion of the claim. It is kind of complicated, but you will be paid roughly the same percentage of the claim as the percentage you are insured to for the property.

I definately see both your and the insurance companies point on this issue, but I do get that its frustrating.

Hard to explain, but make sure you get things straightened out or it could bite you in the a** if you had a claim.

 

[ericrm2005]

Ohh, one more tid bit of info.

Ask your agent if you can be covered under "functional replacement cost".

We come across this quite a bit. One of our insureds might have a 50k bushel bin, but in all reality only need a 25k bushel grain bin anymore. In this situation we would cover them under Functional Replacement Cost. Under this covererage we understand that if the bin were destroyed he would not need to replace it with a 50k bin, only the 25. He therefore only pays for the amount of coverage he needs for what he determines is a "functional replacement".

Again, I do not know if these options are available for residential property insurance, however I would imagine they are.

Sorry for rambling, haha. Good Luck.

 

[Bird]

Ask your agent if you can be covered under "functional replacement cost".

I never heard of that before, but it certainly sounds reasonable. However, I'd be very surprised if it applied to residential property, and especially if there were a mortgage involved (which of course the OP doesn't have).

Anyway, I'm glad you posted that; something else new to me.

 

[blueriver]

Talk to your state's insurance commission about the issue. We have talked to them several times and they have been very helpful. We have not always gotten the answer we wanted but at least we knew the rules/regs/laws.

Your situation is odd. Do you have an agent to talk to or just talking to whom ever picks up the phone at the 800 number?

Can you get better insurance cheaper or at the same cost from another company? We use Farm Bureau and they have been awesome for us. :thumbsup:

Later,
Dan

I do have an agent and I am seeking quotes.