homeowner insurance
11-10-2013, 01:50 PM
#1
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homeowner insurance
I am wondering if I can insure my home for less than what its worth. What I mean is if I were to sell my home I would get less than if I were to get a check from Allstate for a total loss.
It just make no sense to me to insure the land.The cost of rebuild is way below what my home is worth. Yet, Allstate keeps insist that I need to insure the full amount ( land plus cost to rebuild.) Plus every year they add an extra $10,000 to the home value so they can increase my premium (citing cost goes up). I live in Minnesota and the house is paid off. Can I just insure my home for whatever amount I choose or do I have to go by Allstate predetermined value? Is my agent just being greedy? Any insurance agent on here want to offer their expertise?
It just make no sense to me to insure the land.The cost of rebuild is way below what my home is worth. Yet, Allstate keeps insist that I need to insure the full amount ( land plus cost to rebuild.) Plus every year they add an extra $10,000 to the home value so they can increase my premium (citing cost goes up). I live in Minnesota and the house is paid off. Can I just insure my home for whatever amount I choose or do I have to go by Allstate predetermined value? Is my agent just being greedy? Any insurance agent on here want to offer their expertise?
11-11-2013, 10:30 PM
#2
Community Organizer
Why not just call around to other insurance agencies and ask?
If you own the house outright, it seems to me that you have no mortgage requirements forcing you to carry coverage (to protect the lender's interest in the property) but I'm not an insurance agent.
If you own the house outright, it seems to me that you have no mortgage requirements forcing you to carry coverage (to protect the lender's interest in the property) but I'm not an insurance agent.
11-12-2013, 04:41 AM
#3
It may also depend on your coverage...
In the example you cited- If you move, you'd take the majority of your belongings, personal items, or other things in the house that have value to you. That includes, furniture, clothes, computers, hobby stuff, art, jewels, etc....
In the case of a catastrophe or something else that caused you to use your insurance, those items might be destroyed and need to be replaced.
It's not just the value of the house, but possibly contents (and maybe other incidentals as well).
As Sabre says - if you don't have a mortgage, there's no requirement likely, except in the event of a catastrophe, would you rather pay to rebuild, or pay the deductible on your policy and whatever your premium was. That's why it's insurance.
As mentioned, call around, talk to different companies, maybe some offer other plans that are more suitable for your needs.
In the example you cited- If you move, you'd take the majority of your belongings, personal items, or other things in the house that have value to you. That includes, furniture, clothes, computers, hobby stuff, art, jewels, etc....
In the case of a catastrophe or something else that caused you to use your insurance, those items might be destroyed and need to be replaced.
It's not just the value of the house, but possibly contents (and maybe other incidentals as well).
As Sabre says - if you don't have a mortgage, there's no requirement likely, except in the event of a catastrophe, would you rather pay to rebuild, or pay the deductible on your policy and whatever your premium was. That's why it's insurance.
As mentioned, call around, talk to different companies, maybe some offer other plans that are more suitable for your needs.
11-12-2013, 05:24 AM
#4
My wife has a Massachusetts real estate brokers license.
Her take on this is:
1. Every state has different rules so these comments apply only to Massachusetts. But they’re pretty standard and would probably apply in most other states as well.
2. If you have a mortgage you only have to insure what the bank requires. Call them and find out their requirements. That is generally only the replacement value of the house and other structures. If you live in a flood zone they will probably require flood insurance as well.
3. If flood insurance is not required and unless you have something valuable on the land [such as timber] there is no need to insure the land.
4. Insurance companies will try to get every premium penny they can get from you .
[When I lived in New Jersey my insurance company tried the same “insure the land” thing too. It was never discussed with them…..it just appeared on the policy. When I called them out on it they removed it without an argument.]
5. Even if the land is insured [and flood insurance is not required] they will pay out only the value you have the house, other structures, and insurance riders insured for.
6. If you do not have a mortgage you don’t need to have any insurance. This is not a good idea for most people.
7. She recommends insuring the house, contents and other structures for their replacement value; flood insurance if required and a excess liability policy in case someone gets hurt on your land.
Her take on this is:
1. Every state has different rules so these comments apply only to Massachusetts. But they’re pretty standard and would probably apply in most other states as well.
2. If you have a mortgage you only have to insure what the bank requires. Call them and find out their requirements. That is generally only the replacement value of the house and other structures. If you live in a flood zone they will probably require flood insurance as well.
3. If flood insurance is not required and unless you have something valuable on the land [such as timber] there is no need to insure the land.
4. Insurance companies will try to get every premium penny they can get from you .
[When I lived in New Jersey my insurance company tried the same “insure the land” thing too. It was never discussed with them…..it just appeared on the policy. When I called them out on it they removed it without an argument.]
5. Even if the land is insured [and flood insurance is not required] they will pay out only the value you have the house, other structures, and insurance riders insured for.
6. If you do not have a mortgage you don’t need to have any insurance. This is not a good idea for most people.
7. She recommends insuring the house, contents and other structures for their replacement value; flood insurance if required and a excess liability policy in case someone gets hurt on your land.
12-19-2013, 06:17 AM
#6
Registered User
You're right. Even if your premiums are high, knocking off $10k of coverage usually won't save you much (a few percent).
Replacement cost vs. actual cash value is a topic that comes up in insurance quite a bit, and here is the short version: it's always going to be less expensive to buy an existing home than to build a one-off (not in a development) home. When you add the cost of debris removal (after a fire for example) you can see why the replacement cost of your home is going to be quite a bit more than it's market value.
That said, imagine a homeowner--not you--who bought his home last week, cash, for $200k. His insurance agent advises him to insure it for $250k, because that's what it would cost to rebuild (including debris removal), but the homeowner is very stubborn and the agent actually sells him a $200k policy. One week later, his house burns to the ground. After cleanup crews knock down the structure, break up the foundation, and haul away the trash, $20k is gone. Contractors are quoting him $230k to rebuild, oh and by the way, the fire that destroyed his home actually wiped out his entire neighborhood and materials are going to be in short supply--might have to get some shipped from a neighboring state--and of course that will cost more. All of a sudden, Mr. Homeowner is out $50k--or more--because he wanted to save a few bucks a year.
He'd be pretty pissed, either at himself or his agent (or both), and what do we do in America when we're pissed off? We sue!! This is a major reason why most insurance companies won't sell you a policy for less than replacement cost. Their attitude is usually, "if you want to insure your house for less, that's fine, but it won't be with us." To them, it's not worth the risk of getting sued.
Your next point--increasing coverage by $10k per year--that's something you can work with. This is usually called "inflation guard" and most companies will increase your coverage by 1-2% per year to account for inflation, increase in materials cost and labor, etc. But much of the time, they increase too much. If you've had your policy for a while and think coverage has increased too much, go to your agent and request that they do a MSB report on your home (Marshall, Swift & Boeckh) to determine it's CURRENT replacement cost. Chances are, that number will be lower than your existing coverage amount. But you can use the MSB report as leverage to reduce your coverage, and consequently, your premium. If they still say no, take your business elsewhere.
But please, don't insure for less than replacement cost. It's never worth it.
Source: I'm an insurance agent.
Replacement cost vs. actual cash value is a topic that comes up in insurance quite a bit, and here is the short version: it's always going to be less expensive to buy an existing home than to build a one-off (not in a development) home. When you add the cost of debris removal (after a fire for example) you can see why the replacement cost of your home is going to be quite a bit more than it's market value.
That said, imagine a homeowner--not you--who bought his home last week, cash, for $200k. His insurance agent advises him to insure it for $250k, because that's what it would cost to rebuild (including debris removal), but the homeowner is very stubborn and the agent actually sells him a $200k policy. One week later, his house burns to the ground. After cleanup crews knock down the structure, break up the foundation, and haul away the trash, $20k is gone. Contractors are quoting him $230k to rebuild, oh and by the way, the fire that destroyed his home actually wiped out his entire neighborhood and materials are going to be in short supply--might have to get some shipped from a neighboring state--and of course that will cost more. All of a sudden, Mr. Homeowner is out $50k--or more--because he wanted to save a few bucks a year.
He'd be pretty pissed, either at himself or his agent (or both), and what do we do in America when we're pissed off? We sue!! This is a major reason why most insurance companies won't sell you a policy for less than replacement cost. Their attitude is usually, "if you want to insure your house for less, that's fine, but it won't be with us." To them, it's not worth the risk of getting sued.
Your next point--increasing coverage by $10k per year--that's something you can work with. This is usually called "inflation guard" and most companies will increase your coverage by 1-2% per year to account for inflation, increase in materials cost and labor, etc. But much of the time, they increase too much. If you've had your policy for a while and think coverage has increased too much, go to your agent and request that they do a MSB report on your home (Marshall, Swift & Boeckh) to determine it's CURRENT replacement cost. Chances are, that number will be lower than your existing coverage amount. But you can use the MSB report as leverage to reduce your coverage, and consequently, your premium. If they still say no, take your business elsewhere.
But please, don't insure for less than replacement cost. It's never worth it.
Source: I'm an insurance agent.
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