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I think my home insurance is too low

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  • I think my home insurance is too low

    But my company won't raise the coverage.

    Home prices here are up 25% in one year, including new builds. A rental I bought for $187 eight years ago is now valued over $400; my primary which I bought for $750 five years ago is now $1.1. However they aren't directly comparable because the rental has land value of only $150k whereas our primary has land value of maybe $700k. That leaves improvement value of $250k for 1250 sf and $400k for 2800 sf, or $200/sf and $150/sf respectively.

    I don't think there's any way our primary could be rebuilt for $150/sf as it is much higher quality than the rental and $200-$225/sf seems about going rate for new class 4 out of 5 build quality around here (on a spade ready lot).

    What do you think? Have you looked at this for your property? I don't plan to have a catastrophic loss but i am risk averse and would rather have the right amount of coverage.

  • #2
    Have you had an appraisal performed or are you using another resource? If you have had an appraisal to verify the replacement cost increase, you might consider shopping the policy or asking to change coverage to replacement value. I can put you in contact with someone if you need (zero financial incentive on my part, as always) but you’ll need to email me as I’m not here to provide a free advertisement.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


    • #3
      Ask the insurance company go over rebuilding cost. They should assess the construction of your house in detail and estimate what it would cost if there were a total loss. If they are not wiling to do that, the definitely shop for another company. The cost of houses in your area has nothing to do with the cost to build yours again if needed.


      • #4
        Does it really matter? Just self ensure the difference. You might be able to convince them to ensure you at a higher amount but that'll also cost you more money for your premiums. Just save the difference and be prepared if you do have a catastrophic loss that you might have to chip in a little bit.

        I would never advise somebody to go without homeowners insurance when their house is a significant portion of their net worth but we are talking about a small fraction of the house.


        • #5
          Who is your insurance company?
          What is the policy type?
          What are the payment options? This is important, some require you to rebuild to get paid, Others let you settle and make your own choices. The problem is for policy limits, a total loss is in dollars, not the actual costs being over the limits.
          I used a Chubb broker and also got other quotes. Ended up going with a higher replacement cost value.

          I disagree with choosing lowest cost only and self insuring. Even if you have wealth to self insure, personal choice. Is this a risk/benefit that you need or want?

          The kicker for me was a multiple loss scenario (unusual but happens). I think you need to get other quotes, get the high end policy type for sure. The claims process is drastically different. The agent/broker can be of tremendous value.
          The insurance companies know that to litigate is 1/3 of the claim. One type the objective is to minimize losses, the other is to have a completely satisfied customer.
          To me, the latter is worth it. If you are shopping online, likely you will get the former. I used a broker and got agents quotes.
          The replacement cost programs used are different.
          They can be tweaked. Don’t try to fight their numbers, but get far enough into to make sure the differences you mentioned in construction are comprehended.
          For example, kitchen cabinets and trim. Custom or off the shelf. You can get multiple quotes to see you are in the replacement value range and with the desired coverage.
          This is a PITA. Shop for value, which is what you are doing. Comp sales prices are irrelevant.