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Replacement with modern materials and methods is what is normal = reconstruction.
You're getting drywall not plaster.
Hardwood for hardwood, not pergo.
This is what the computer models estimate.
"Reproduction" (plaster etc required sometimes for historic homes) would require a special kind of coverage. This requires a much more sophisticated valuation process - expert contractors, not computers.
Arson for profit schemes aren't new, the insurance companies have been doing this a while and they watch for it.
You could get what you want (London), but you wouldn't want to pay for the customized product.
Those that have been around a while know that what you think is fine idea today to reduce your premium won't be what you want after a loss.
If you have an appetite to accept risk, just take as big a deductible as they'll offer.
Ok, so I read up a bit more on the coinsurance penalty, thanks to Zambendorfjr for bringing this up, and my first thought was; what a sham! If I am paying $1K for $250K of coverage, all I want is to collect $250k when sh.t happens and not a penny more. But now if I under-insure, all of a sudden my premium of $1k pays only for a portion of what I thought was $250k of coverage. WTF!!! How is this legal?
Should those that buy 250K cover on a 250K building pay the same as those who buy 250K on a 500K building? No, the probability of burning through the 250K is much higher if it reflects only the first 250K of the exposure.
The rates the actuaries set are generated based on the assumption that they're being applied to 100% values. The buyer is expected to supply the 100% value. If they don't, they've cheated and appropriate penalties should be applied.
For auto insurance rating, they ask a driver how many miles between their home and work, and those that lie and say 25 when its really 50, they're asking honest consumers to subsidize their insurance bill.
For health insurance rating they ask the person if they smoke, the smokers that lie and say "no" expect the honest consumers to subsidize their insurance bill.
This is just the equivalent expectation for the homeowners insurance transaction.
It's actually pretty generous, the penalty is a function of the size of the lie/error rather than a full declination.
That's correct. Coinsurance penalty clauses exist as a deterrent to under-insurance, because the actuarial integrity of the rating structure requires insurance to value. Why? Because most losses are partial, not total.
I've always wondered why actuaries can't come up with a way to allow those that wish to carry less do so, but I'm sure that whatever they would come up with would involve higher rates per $100.
Never buy an Actual Cash Value policy if Replacement Cost is available, which is almost universal today. The depreciation amount (age and obsolescence) will work like an auto comprehensive or collision loss, and you'll be very, very disappointed in what you can collect.
The better strategy, as mentioned above, is to swallow hard and accept the high estimated replacement numbers and shop around for the best combination of coverage, premium, and agency service. Homeowners policies are NOT commodities with identical coverage. Real and substantial differences exist in the optional enhancement endorsements used to differentiate brands. It's not like buying gasoline from brand to brand, although there are different program coverage levels (think Regular vs. High Test) with some companies, if you qualify. Look for discounts if you combine the auto with the home.
Whats interesting in all of this is that I shopped around at 6-7 different companies when we bought our house in 06 and only half of them came back with coverage amount anywhere near what we paid for the house. I had to ask for MORE coverage, not less. I made sure to ask for rebuild cost not cash value. I made sure to explain the upgrades (real wood cabinets, not just the cabinet face, 3/4 walnut flooring not laminate, pergo or engineered, Wool berber carpets, real marble and slate in the bathrooms, etc) and they still came back at only 75%. Only State Farm and NJ Skylands were willing to listen to my requests and understood that I also wanted to make sure that they would pay extras such as a hotel and expenses during reconstruction as well as the contents of the house, furniture, electronics, etc. They were still under what I paid but ensured me it would all be covered with only my deductible as my out of pocket expenses. Neither offered to come do an onsite inspection. So, I told both companies I was comparing them to each other. Even gave them the others quotes to make sure I I was comparing apples to apples and asked where and why would I choose them over the other. In the end I went with NJ Skylands for $700/year Vs State Farm for $950.
Bottom line, you can tell them how much you want to insure it for as long as mortgage company is happy. Most will also let you insure it for as much as you think its worth.
State Farm seems to play this up to me. They came out to my house and took pictures and tried to convince me I need more than I think we do... then they automatically raise the rates to keep up with material costs and building costs.
You are absolutely wrong. The broker might let you get the policy for the mortgage amount to get through the closing, but any company that does a physical inspection of the home (or agency that pays to have a vendor inspect the home) will require you to increase the value based on that inspection.
There is not a company out there that will "let you insure it for as much as you think it worht" whether it is under or over insuring. Companies want to ensure that you are made whole after a loss, not be left with less and definitely not be left with a huge winfall. There are certain companies that have cash out options and these companies are definitely much stricter then most when determining the replacement cost.
Homeowners need to understand that the Insurance Companies are not trying to ********* out of money, they are trying to protect what I am guessing is most people's largest investment. Sure there are companies and brokers out there who do not do the right thing, but for the most part the underwriters, adjusters and companies as a whole have your best interests in mind.
If you think 350K is out of line, ask another agent to work up a replacement cost estimate.
Your problem may not be with "State Farm" but with their unscrupulous local agent.
The agent that lets you insure for "what you want" is a sleazeball salesman, not a professional.
It does not cost you anything to rebuild, it will cost the Insurance Company and while a builder/contractor would negotiate with you on the cost per square foot, they not negotiate with an insurance company. You also have to take into account all of the soft costs such as architecture fees, rebuilding to current builcing codes, inspections etc and the costs for those are not inexpensive, so while it may be $200k to build the actual structure, it will cost $350k for all the costs associated with the rebuild.
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