If you own a house, is it adequately insured?

[question everything]

Our appreciated significantly and when I looked at the amount for which it is insured I called the agent who told me that this is a replacement cost at a rate of $150 per sq. foot. I am not sure whether this is the way to go and am not sure what are the alternatives.

Suggestions, comments, anyone?

[OneBlueSky]

1. funny you should mention it . . .

I've been meaning to increase my coverage but have never gotten around to it . . . I think the house is probably worth double what it was when I took out the policy . . . think I'll be calling USAA this week . . .

[Droopy]

2. It depends

The insurance company is betting that you will not have to replace the home. You are betting that it could happen. My thinking is that if you are insured enough to cover your mortgage you are doing alright. But I'm betting that an event that you will have to replace your home will be very unlikely. I would just make sure that you have enough to cover your mortgage. That way you are covered if something does happen, and you are paying less money in the event that nothing happens.

[question everything]

4. Thank you. It does make sense, except that if the house is in SoCal

for example, a 1500 sq. ft will be insured by $225,000, based on a replacement cost of $150 per sq. ft, even though to buy new would easily cost $350,000 or more. And many would have refinanced now, or have taken home equity loans based on the market value that can easily be more than $225,000. And for homeowners who lost their homes in the fires of Southern California or to hurricanes in Florida, the difference between a replacement cost or a market value can make a lot of difference.

[radwriter0555]

6. Right, the insurance co is betting on construction COSTS, NOT

value of the property.

The LAND itself, especially in a place like los angeles, is where the value lies. If you look at the property description, you'll see the house's actual COST isn't incredibly high.

The insurance co is basing its quote on how much it will cost them to replace your house, per square foot. Not on retail value. They're looking at lumber, electric, plumbing, roof, walls, paint, flooring and so on.

[medeak]

3. learned the hard way

you have to get riders of items over a certain cost...and pay extra.

[radwriter0555]

5. You should also insure CONTENTS against theft. It's only a couple

dollars more and would make a huge difference if you were to have a break it.

$150 psf for a re-build is about right, for construction costs actually... that's a very fair price.

I pay about $600 per year for a comprehensive insurance policy. I got some fancy crap teevees and computers and figured it's worth insuring them and my jewelry and clothing, etc, in case of fire, theft and so on.

Better safe than sorry, that's for sure.

[DemWitch]

7. Most insurance companies offer replacement value as a

standard option now. My old house was valued at 76K, but the insurance company put the price for replacement at 168K. The premiums were going to be around 700 bucks a year. I inusred it for just the cost of the mortgage (31K) and my premiums were only 175 bucks a year. The problem with replacement insurance are the regulations. For instance with my policy, the house had to be rebuilt on the same site and within 1 year of the loss, or the comaony wouldn't have to pay. Say I lost the house in November. No constrction until March, and then try to find a contractor that could build a 2500 sq. ft. house in six months... impossible... Also, the insurance wouldn't pay for debris removal until AFTER the new houe was built. So you had to pay out of your own pocket, then if the house couldn't get built, oh, well...

Insurance companies are scum sucking whores... they will screw you anyway they can. Check out the policy and you'll see that almost any loss can be denied if so inclined by the company. The first house I owned I lost to fire. It took 4 years of legal wrangling to get them to pay the house off, and my content value.

I recently moved into a mobile home, and the only insurance I carry is for liability, 10K on contents, and the cost of the loan, with no replacement clause. My premiums are 110 bucks a year.

[question everything]

8. Homeowners losing ground on insurance

Tuesday, September 7, 2004

Homeowners losing ground on insurance

Many disaster victims are finding out their policies fall woefully short of covering the cost of replacement.

By JOSEPH B. TREASTER
The New York Times

EL CAJON Karla and Bruce Carroll remember the sheriff on his bullhorn ordering residents to evacuate and, minutes later, hearing the roar of monstrous flames arcing toward their modest home in the hills above San Diego. Karla Carroll grabbed a photo album as they ran to safety; Bruce started to gather his fishing rods. But she hustled him along. "Don't worry about those things," she recalls saying at the time. "We've got insurance."

But, the Carrolls say, the insurance they bought from State Farm, the nation's largest property insurer, has left them at least $100,000 short of the cost of rebuilding their home. Today, nearly a year later, they are still wrangling with their insurer and living in a 29-foot-long house trailer on the land where their three-bedroom home once stood, overlooking a sweep of ridges and canyons.

Their woeful shortfall in insurance coverage, experts say, is a plight shared unknowingly by millions of American homeowners. It has been fed largely by a shift in the way property insurance has been sold in recent years. Insurance companies began in the late 1990s to phase out coverage that guaranteed the replacement of a destroyed home, regardless of the expense to the insurer. In place of that unlimited coverage, which had become nearly universal, insurers substituted a similar sounding policy with a crucial difference: It only pays the amount stated on the policy plus, typically, an additional 20 percent to 25 percent.

For their part, insurers insist that it is the consumer's responsibility to acquire adequate coverage. The old policy was called a guaranteed-replacement policy. The new one, which most Americans now have, is called an extended-replacement policy... Marshall & Swift/Boeckh, a Los Angeles company most insurers rely on for help in calculating the value of houses, estimates that 64 percent of American homes are underinsured by an average of 27 percent, with some homes underinsured by 60 percent or more. Another company, AIR Worldwide in Boston, estimates that many upper-income homes in New England are underinsured by 30 percent to 40 percent.

More..

http://www.ocregister.com/ocr/2004/09/07/sections/business/oc_region/article_230460.php