Bought New Home - Home Insurance

[XtremeSki2001]

Hi All,

The good news, we bought a home, and this one doesn't have Radon! http://www.bogleheads.org/forum/viewtopic.php?f=11&t=111556 I've received two quotes for home insurance and they differ by $200/year. Once is from the local person we have our auto/umbrella through (more expensive) and the other is through a new rep that our realtor suggested.

In comparing the two, they look the same, but the cheaper one puts the value of the home about $100k less than the more expensive quote. It's worth adding that the more expensive quote is valuing the home at 15% more than the purchase price while the cheaper quote values the home at 12% less the purchase price.

What are your thoughts?

[livesoft]

Tell the expensive guy that you want to pay $200 less or you will take your other insurance elsewhere.

[cheese_breath]

You want to make sure you insure your home for its replacement cost. Do you know what it would cost to rebuild the house from the ground up if it burned down? Note, replacement cost and purchase price are not the same because the property is included in the purchase price, and you don't have to replace the land. So maybe the less expensive policy is OK. On the other hand did you get a great price on the house? Maybe the more expensive policy is right. Since you probably need insurance right away I'd go with the more expensive policy to play it safe for now. But then I'd get a few more quotes from other insurers. and compare theirs with the ones you already have. You can always cancel the first policy if it is too much and switch to another one any time.

[SimonJester]

You need to compare apple to apples, ask the new guy to re quote you at the same price as your other insurance.

[Quasimodo]

Here's one article that discusses the difference between replacement cost and market value:

http://www.insurance4usa.com/replacemen ... -value.cfm

excerpt:

“There are different methods to determine the value of a house. Market value is the price paid for your house. Replacement cost is the price or cost it will take to rebuild your house in the same spot, same size and same quality of construction, at today's costs. Insurance companies use the replacement cost valuation. These can be two completely different numbers.”

Another valuation term used in property insurance is “actual cash value”, which is replacement cost less depreciation.

The previous advice to ask the different companies to quote using the same valuation is a good idea. You want to compare quotes where both are using the same coinsurance percentage and valuation basis. Actual cash value at 80% coinsurance is going to be a lot different from replacement cost at 100% coinsurance, for example.

You want to make sure there isn’t a coinsurance penalty at the time of a loss because the insurer says you didn’t buy enough insurance for the property, so I’d try to make sure the property has been appraised by the insurer you select and you and the insurer agree on the amount of insurance necessary to meet the coinsurance clause in the policy.

John