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Old 12-15-2009, 10:34 PM
 
Location: In the woods
3,315 posts, read 9,695,629 times
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I am buying a new house. Actually, it's an old /historic house -- a 1930s Arts & Crafts. The estimate for the home insurance policy is $115,000 more than the appraised value of the house ($225,000)which makes it $340,000. The insurance company says that they have to consider the age of the house as well as the cost to re-build it using today's cost of materials and labor. The house is two-story, all brick, 5 BRs, full basement (unfinished) with some nice features like a front porch, rooftop deck, carriage house, and iron fence in the backyard.

Has anyone had a similar experience? I am just wondering if this is the norm with an older house.
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Old 12-15-2009, 11:44 PM
 
17,598 posts, read 30,994,705 times
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I think it's the norm to insure a house for "replacement cost," which has nothing to do with a bank appraisal or a market estimate. Replacement cost is a good thing, should you need to rebuild the house after a fire or natural disaster (although I believe you need a special rider for earthquake coverage, and there is no coverage for volcano that I know of).
I have earthquake coverage and it's a few hundred dollars more.
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Old 12-16-2009, 05:58 AM
 
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Old or new you NEVER insure for market value ONLY replacement cost. I think you will find that almost everyone right now SHOULD be insuring their homes for more than they paid for them because most homes will cost more to rebuild.

In your situation I would make sure the extra $115,000 is enough. Look at the woodwork alone in your house and that is a pretty penny to replace. Good for your agent for understanding this. I would rather be a little over insured than under insured.
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Old 12-16-2009, 06:22 AM
 
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Today's materail foten makes it evry expensive to replace a historial; home. in fact I'd make sure that you insure it for enough because that is what you will get total from damage and nothign more. Upto that amount they will pay replacement but once you reasch that limit; that is it.As the home replacement cost goes up(labor and materials) ;so does the insurance cost.
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Old 12-16-2009, 10:20 AM
 
Location: In the woods
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Thanks everyone so far! This is new to me (my last home was brand new and in a suburban development) . I do plan to take a close look at the policy to see what exactly they've looked at (i.e., woodwork, historic details, etc.). But this is great information!
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Old 12-16-2009, 10:39 AM
 
Location: NJ
4,930 posts, read 11,435,521 times
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If you collect the replacement cost insurance money, do you actually have to rebuild the house to get the money? If my house was completely destroyed I don't think I would go through the hassel of rebuilding. I would collect the insurance money and find another existing house of similar value.
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Old 12-16-2009, 11:21 AM
 
Location: South Park, San Diego
6,086 posts, read 9,974,259 times
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Quote:
Originally Posted by ansky View Post
If you collect the replacement cost insurance money, do you actually have to rebuild the house to get the money? If my house was completely destroyed I don't think I would go through the hassel of rebuilding. I would collect the insurance money and find another existing house of similar value.
The insurance company could care less as to what you do with your money, its just a settlement and it is yours to do with what you wish.
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Old 12-16-2009, 11:40 AM
 
Location: Sinking in the Great Salt Lake
13,144 posts, read 21,760,640 times
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I have my historic bungalow insured about 50K over it's value for the same reason.
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Old 12-16-2009, 04:10 PM
 
Location: In the woods
3,315 posts, read 9,695,629 times
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Quote:
Originally Posted by T. Damon View Post
The insurance company could care less as to what you do with your money, its just a settlement and it is yours to do with what you wish.
That's right. You still own the land but it wouldn't have a structure. You do what you want with the money.
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Old 12-17-2009, 03:54 AM
 
20,793 posts, read 58,973,201 times
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Quote:
Originally Posted by ansky View Post
If you collect the replacement cost insurance money, do you actually have to rebuild the house to get the money? If my house was completely destroyed I don't think I would go through the hassel of rebuilding. I would collect the insurance money and find another existing house of similar value.
Chances are what would happen then is you would get somewhere between 80-100% of the insured value of the home if you didn't replace on that exact site. Most policies have a provision build in that they will insure for replacement up to about 120% with the thought that if there was a natural disaster that cause the damage prices would sky rocket or that you might have to bring your house up to existing code which would cost more, you would not get that. It is going to vary by company.
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