Homeowners Insurance - Guaranteed Replacement (flooring, how much, vinyl, heating)

[sierraAZ]

Do any of you have guaranteed replacement cost coverage (of the structure)? From what I'm reading, it's supposedly offered. The companies I've talked with so far are saying they're not offering it anymore. It appears the best you can get is an extended replacement cost policy paying an extra 20 or 25% above the limits. Do these policies include inflation guard (automatically adjusting the dwelling limit at renewal time to reflect current construction costs) or is that a separate item?

I can get guaranteed replacement only with MetLife, but their track record of handling claims is not particularly impressive (and no agent in town). Nobody else's really is, short of some that insure only 1/2 (or even 1) mil+ houses... Even these policies apparently don't pay for the extra expense of rebuilding to code.

Now I'm reading that some insurance companies offer an Ordinance or Law endorsement that pays a specified amount toward these costs. Is anybody familiar with it? Is it very expensive? If you have it, which company is your home insured with?

I'd appreciate your help.

[golfgal]

Insurance laws vary from state to state but in MN most companies offer guaranteed replacement cost on your belongings but will only insure up to 20% over the insured value of your home. Inflation protection is offered and isn't expensive at all--in fact it usually doesn't cost anything to have that endorsement but when they increase your home value yearly your premiums will obviously increase. The extra 20% you have on your home is there to cover new building codes or increased costs of construction during catastrophes, etc.

Most commercial policies can have an endorsement to cover building code changes mainly because brining an office building up to code is significantly more expensive then bringing a home up to code. The main worry in bringing a home up to code would be electrical and that isn't all that expensive. Keep in mind that usually those would be covered anyway. Your replacement cost is just that, if you have knob and tube wiring in your home and you have a fire your 'replacement' would be knob and tube, since that is no longer available, you would get the romex wiring they have now.

It is very important to let your insurance agent know if you have added on to your home or done any remodeling that has increased the value of your home so you can keep your house insured for the proper value. Most people insure their home for the amount of their mortgage and that isn't always the best number to use.

We had a 1920's original Craftsman home that we bought in 1993 for $66,000. There was no way we could rebuild that home for that cost, not even close. That home should have been insured for at least $250,000, depending on where you live. This is a prime example of why they don't offer guaranteed replacement cost any longer--we could have been paying premiums on the $66,000, had a total loss and they would have had to pay out the $250,000+ to rebuild. Insurance companies are not charities, they are in the business to make money, these kinds of situations don't make money for the companies so they don't offer it.

It is the same with water damage--they don't cover flooding because floods cause more damage then all other perils combined. By covering flooding you will either bankrupt the insurance system or price pretty much every home owner out of the market to own a home--look at what is happening with premium prices in Florida. Most people can't afford their insurance, if they can even GET insurance there any more.

[sierraAZ]

Originally Posted by golfgal

Insurance laws vary from state to state but in MN most companies offer guaranteed replacement cost on your belongings but will only insure up to 20% over the insured value of your home. Inflation protection is offered and isn't expensive at all--in fact it usually doesn't cost anything to have that endorsement but when they increase your home value yearly your premiums will obviously increase. The extra 20% you have on your home is there to cover new building codes or increased costs of construction during catastrophes, etc.

Most commercial policies can have an endorsement to cover building code changes mainly because brining an office building up to code is significantly more expensive then bringing a home up to code. The main worry in bringing a home up to code would be electrical and that isn't all that expensive. Keep in mind that usually those would be covered anyway. Your replacement cost is just that, if you have knob and tube wiring in your home and you have a fire your 'replacement' would be knob and tube, since that is no longer available, you would get the romex wiring they have now.

It is very important to let your insurance agent know if you have added on to your home or done any remodeling that has increased the value of your home so you can keep your house insured for the proper value. Most people insure their home for the amount of their mortgage and that isn't always the best number to use.

We had a 1920's original Craftsman home that we bought in 1993 for $66,000. There was no way we could rebuild that home for that cost, not even close. That home should have been insured for at least $250,000, depending on where you live. This is a prime example of why they don't offer guaranteed replacement cost any longer--we could have been paying premiums on the $66,000, had a total loss and they would have had to pay out the $250,000+ to rebuild. Insurance companies are not charities, they are in the business to make money, these kinds of situations don't make money for the companies so they don't offer it.

It is the same with water damage--they don't cover flooding because floods cause more damage then all other perils combined. By covering flooding you will either bankrupt the insurance system or price pretty much every home owner out of the market to own a home--look at what is happening with premium prices in Florida. Most people can't afford their insurance, if they can even GET insurance there any more.

Thank you for responding, golfgal. Yeah, I know the insurance companies are mainly in the business of collecting money from us ATMs and ideally would never, ever pay anything out... How many people keep paying year after year and never need to collect a dime?! You'd think it gives the insurance companies enough cushion to pay when they have to and still make more than enough!

Not sure if this is state-specific, but it looks like nobody offers guaranteed replacement cost coverage of the structure here in AZ. The cap varies between 20 and 25%. I did find a reputable company (Amica) which offers 30% cap, but they don't have offices or brokers in Tucson and I'd rather discuss everything in person.

I can see the replacement cost of a house like yours may be way higher than your purchase price, but in my case we're talking about a brand new cookie-cutter house... Of course, I will insure it for the full value and not the amount of the mortgage. It always baffles me when I see discussions about homeowners insurance how everybody brags about lower premiums. I like low premiums like the next person, but what matters to me is their track record in handling claims and pretty much nobody's is good at that... The only company with quite impeccable record I found out (Chubb) insures only over 1/2 mil. houses. There was another one insuring only over 1 mil houses! Seems like the rest of us get to make a choice among which one is a little less awful...

[golfgal]

A lot of people shop by premium alone. They don't look into their coverage levels, service, claims handling, etc. You could be paying less for one company but you also have less coverage so if you compared the same coverage levels you would be paying more.

Insurance in AZ is just expensive. I don't know why. Costs vary so much from state to state. Auto insurance in Wisconsin is about 1/2 of what it is here in Minnesota, BUT we have better coverage options in MN too so you get what you pay for.

Check with American Family Insurance. They are one of the top companies for claims handling and by insuring your home and auto there you can get some pretty good discounts.

Insurance is a gamble, you are gambling that you will have claims that exceed your premiums and the insurance company is gambling that you won't. Everyone hates insurance companies until they really need them.

One thing to keep in mind about people's unhappiness with claims handling is that MOST people that are disgruntled about a claim don't understand their policies and don't understand how they work. They think they should be getting a coverage that they don't or they don't understand how their deductibles work and then get mad at the claims process when they ARE getting what they are entitled to receive.

One example, you have vinyl flooring in your kitchen, you have a kitchen fire that ruins that flooring and you want to replace it with ceremaic tile. You will get $1500 to replace the vinyl but the tile costs $2500. They get mad because the insurance company won't pay the $2500 for the tile. The insurance company doesn't have to replace the floor with tile, they have to replace what you had, vinyl. Then the person complains to everyone that their insurance company is cheating them out of a claim.

There are companies that do try to get out of paying a claim but most larger companies don't.

[LaceyEx]

We recently switched to AAA-we were paying over $800 for homeowner's, $600 for car and $195 for $1M umbrella. Better coverage from AAA and $600 less. All these years of having it and never thought to check.

Needless to say our agent wasn't happy-lost his little commission but you have to look out for number 1. When we called him to cancel he said "oh I could've done better-give me another chance." Told him it's not that we couldn't afford it-but why should we have to pay it.

[sierraAZ]

Originally Posted by golfgal

Insurance in AZ is just expensive. I don't know why.

I haven't dealt with it for two years, but I didn't think homeowners insurance was that expensive in AZ... Then again, I haven't compared to other states. I used Nationwide before. At the time of that research they seemed decent... My car is still insured with AllState, but there's no way I'm insuring a house with them after all the horror stories I've read.

Check with American Family Insurance. They are one of the top companies for claims handling and by insuring your home and auto there you can get some pretty good discounts.

Thanks for the suggestion. I was thinking about them, too. On one website they had only 29% of customers unhappy with the handling of their claims whereas the average for the rest was about 40%, with Hartford at a whopping 67%!

Of course, most of the major household names are on the hall of shame list http://www.badfaithinsurance.org/indexdetaillist.html , but Hartford definitely gets consistently bad reviews. What amazes me is that the better ones are much less known or they might be regional.

I was under the impression that a good agent can make a difference, but it doesn't appear so. People are saying that even though their agent is willing to help and do his/her best, his/her hands are tied once you need to make a claim. Not sure if it's true.

One thing to keep in mind about people's unhappiness with claims handling is that MOST people that are disgruntled about a claim don't understand their policies and don't understand how they work. They think they should be getting a coverage that they don't or they don't understand how their deductibles work and then get mad at the claims process when they ARE getting what they are entitled to receive.

While there is truth to this as well, what insurance companies did in New Orleans (and other places) is simply shameful...

[golfgal]

Keep in mind that insurance companies went above and beyond in New Orleans and Florida during those hurricanes. Many people did NOT have coverage for what they were making claims on, specifically flood insurance. Again, it gives insurance companies a bad name when people cry foul when they don't get coverage for things that are not covered. Yes, a lot of people lost their homes but then again a lot of people refused to spend the extra few dollars to buy flood insurance too. Even with flood insurance there is a cap on how much is paid out so even with that a lot of people would have still lost their homes.

[sierraAZ]

Originally Posted by golfgal

Keep in mind that insurance companies went above and beyond in New Orleans and Florida during those hurricanes. Many people did NOT have coverage for what they were making claims on, specifically flood insurance. Again, it gives insurance companies a bad name when people cry foul when they don't get coverage for things that are not covered. Yes, a lot of people lost their homes but then again a lot of people refused to spend the extra few dollars to buy flood insurance too. Even with flood insurance there is a cap on how much is paid out so even with that a lot of people would have still lost their homes.

Well, obviously I don't know the details of their policies, but just recently was reading about somebody who definitely had his house destroyed by the winds (and had pictures, I believe) and yet the insurance company tried to claim it was flooded. There are numerous horror stories that have happened even outside of times of disasters. If you look for them online, your hair will rise ...

Flood insurance hardly costs "a few extra bucks." We don't have this problem here in Tucson, but just recently this issue came up with FEMA redrawing the maps and trying to claim some areas of town a flood risk. We were discussing it on the Tucson forum. The numbers are quite shocking! Shocking to a point that some people may no longer be able to afford their homes...

http://www.city-data.com/forum/tucso...74-marana.html

[golfgal]

Originally Posted by sierraAZ

Well, obviously I don't know the details of their policies, but just recently was reading about somebody who definitely had his house destroyed by the winds (and had pictures, I believe) and yet the insurance company tried to claim it was flooded. There are numerous horror stories that have happened even outside of times of disasters. If you look for them online, your hair will rise ...

Flood insurance hardly costs "a few extra bucks." We don't have this problem here in Tucson, but just recently this issue came up with FEMA redrawing the maps and trying to claim some areas of town a flood risk. We were discussing it on the Tucson forum. The numbers are quite shocking! Shocking to a point that some people may no longer be able to afford their homes...

http://www.city-data.com/forum/tucso...74-marana.html

For low risk areas flood insurance is about $300 year, for high risk areas it is about $2500/year IF you can get it. Flood insurance is through the federal government, the policies are just administered through local agents (basically they do the paperwork). Insurance companies have NO say in what is or is not included in the policies or how the boundaries are determined. The boundaries are redrawn frequently but the government. People turn around and blame this on the insurance companies, giving them a bad name, yet is really a FEMA/Government issue.

Not all areas participate in the federal flood insurance program either. If your town doesn't participate, you can't get flood insurance. The town that neighbors our town JUST got accepted into the program about 3 months ago and even then it takes about 2 years before all the drawings/zone are determined.

There are some insurance companies that will try to get out of paying claims, yes, but like I said, most of the larger companies back up their policies. I know that State Farm was involved in a lawsuit over the handling of claims in the south after the hurricanes and won, which almost never happens when insurance companies are taken to court. They were found to be paying out claims in accordance with their policy coverages. The hurricanes bankrupted some companies and they were obviously not able to pay out claims, which is another good reason to go with a larger company vs Joe's insurance company to save a few bucks.

[Tesaje]

I remember reading the insurance companies clocking in record profits in the couple of years following Katrina.

The really big problem is all those jurisdictions that allow building in flood plains. It is just foolish and short sighted. We should be farming or leaving the flood plains to natural growth and building on the high ground. You aren't going to win in a fight against Mother Nature, especially with rising sea levels.