Homeowner's Insurance - How Do You Evaluate?

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fishmonger
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Homeowner's Insurance - How Do You Evaluate?

Post by fishmonger » Wed Dec 13, 2017 11:05 am

So for someone who's on top of almost all financial issues, one I have never really delved into much is homeowner's insurance, both coverages and premiums. I've shopped around on price and generally taken my agent's advice on coverage. I just received a 10% premium increase for my renewal and figured this was as good a time as any. The particulars, and my comments:

Purchased home for $317k in Dec 2016 in rural NH. House is 3,000 sqft, 4 BD/3 BA, 2 car garage, finished basement. No over the top finishes or fixtures

Coverages per my policy:

Dwelling: $500k - Seems high for this area, even though I know replacement costs more than I think (I work in the construction industry)
Other structures: $50k - We have no outside structures other than a small tool shed that I could replace myself for probably $500
Personal property: $250k - This seems extremely high. I know it would cost more than one would think to replace everything in your house, but I bet we could do it for $50k, maybe $75k max
Addl Living Expense: $100k - We both have family in the area, so in reality during a total loss our expense would be close to zero
Personal Liab: $500k - Necessary? I have a $1M umbrella policy
Medical Payments: $10k

Policy has a $1,000 deductible which I could certainly increase but I doubt that would give me much of a break on the premium. Annual premium is $1291

Any advice would be appreciated!

ResearchMed
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by ResearchMed » Wed Dec 13, 2017 11:13 am

fishmonger wrote:
Wed Dec 13, 2017 11:05 am
So for someone who's on top of almost all financial issues, one I have never really delved into much is homeowner's insurance, both coverages and premiums. I've shopped around on price and generally taken my agent's advice on coverage. I just received a 10% premium increase for my renewal and figured this was as good a time as any. The particulars, and my comments:

Purchased home for $317k in Dec 2016 in rural NH. House is 3,000 sqft, 4 BD/3 BA, 2 car garage, finished basement. No over the top finishes or fixtures

Coverages per my policy:

Dwelling: $500k - Seems high for this area, even though I know replacement costs more than I think (I work in the construction industry)
Other structures: $50k - We have no outside structures other than a small tool shed that I could replace myself for probably $500
Personal property: $250k - This seems extremely high. I know it would cost more than one would think to replace everything in your house, but I bet we could do it for $50k, maybe $75k max
Addl Living Expense: $100k - We both have family in the area, so in reality during a total loss our expense would be close to zero
Personal Liab: $500k - Necessary? I have a $1M umbrella policy
Medical Payments: $10k

Policy has a $1,000 deductible which I could certainly increase but I doubt that would give me much of a break on the premium. Annual premium is $1291

Any advice would be appreciated!
Check with your insurance agent, about a couple of things, including comparing rates with other insurers.

Some of the coverages may be a strict percentage of the base, although I'm not sure about the specifics of what you are describing.
That is, you may or may not be able to adjust the personal property amount.
Also, make sure that the replacement value isn't based upon the "total value/price including the land".

Liability... the umbrella policy will usually require a specific coverage for this.

Did you check on the price with a higher deductible? We upped ours, and it saved a considerable amount.
(Of course, the next year, the furnace had a meltdown :( But we've made up the difference since then, at least.)

We also care about an insurer that pays without all sorts of obstacles... but that can be difficult to determine prior to any claims.

RM
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barnaclebob
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by barnaclebob » Wed Dec 13, 2017 11:27 am

Personal property is very deceptive. There was a post on Reddit where someone who used to process the claims for personal property explained it very well. They went through a thought exercise on just what is in a typical bathroom and came up with several hundred dollars worth of things to be replaced. Sure you may have accumulated all of your clothing over a decade and at sale prices but what if you have to go buy it all at once and don't have the luxury of time? Additionally on your claim if you write down "digital camera" they will pick the cheapest digital camera on the market to compare to. But if you give the exact specs you'll get paid what you deserve.

You may also want to keep it high because if you have a fire and your house is a total loss you may be able to recover more money in the personal property part of the policy if the insurance company is stingy in other areas.

If I remember correctly the additional building coverage is usually set at 10% of the house value. We had 35k of coverage even though we had no additional buildings.

PSA to everyone: take a photo inventory of your house every few years, especially anything you really care about like tools, kitchen appliances or specialized equipment. You can't just tell the insurance company you had $40k of tools in your garage, you'll probably have to itemize the list.
Last edited by barnaclebob on Wed Dec 13, 2017 11:31 am, edited 1 time in total.

ResearchMed
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by ResearchMed » Wed Dec 13, 2017 11:29 am

barnaclebob wrote:
Wed Dec 13, 2017 11:27 am
Personal property is very deceptive. There was a post on Reddit where someone who used to process the claims for personal property explained it very well. They went through a thought exercise on just what is in a typical bathroom and came up with several hundred dollars worth of things to be replaced. Sure you may have accumulated all of your clothing over a decade and at sale prices but what if you have to go buy it all at once and don't have the luxury of time? Additionally on your claim if you write down "digital camera" they will pick the cheapest digital camera on the market to compare to. But if you give the exact specs you'll get paid what you deserve.

You may also want to keep it high because if you have a fire and your house is a total loss you may be able to recover more money in the personal property part of the policy if the insurance company is stingy in other areas.
You might also want to double check whether you have "full replacement value", which is as it sounds, or if they'll pay for depreciated value, which could be very low.

RM
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pshonore
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by pshonore » Wed Dec 13, 2017 11:36 am

In my opinion, you are under insured. I know in southern New England, it would cost significantly more to replace your house than $100/sq ft for a total loss and that's not including debris removal, etc. When you say rural NH, Fire protection code is a key factor in rating Homeowners. If you have a paid city fire dept, that's generally the cheapest, a volunteer dept would be more, and even more if a volunteer dept does not have easy access to hydrants etc. If they have to chop through ice on a pond, that could make a difference.

fishmonger
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by fishmonger » Wed Dec 13, 2017 11:42 am

pshonore wrote:
Wed Dec 13, 2017 11:36 am
In my opinion, you are under insured. I know in southern New England, it would cost significantly more to replace your house than $100/sq ft for a total loss and that's not including debris removal, etc. When you say rural NH, Fire protection code is a key factor in rating Homeowners. If you have a paid city fire dept, that's generally the cheapest, a volunteer dept would be more, and even more if a volunteer dept does not have easy access to hydrants etc. If they have to chop through ice on a pond, that could make a difference.
I said rural, but it's not that rural. I live in a town of 30,000 residents, full-time FD, etc.

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dm200
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by dm200 » Wed Dec 13, 2017 11:42 am

fishmonger wrote:
Wed Dec 13, 2017 11:05 am
So for someone who's on top of almost all financial issues, one I have never really delved into much is homeowner's insurance, both coverages and premiums. I've shopped around on price and generally taken my agent's advice on coverage. I just received a 10% premium increase for my renewal and figured this was as good a time as any. The particulars, and my comments:

Purchased home for $317k in Dec 2016 in rural NH. House is 3,000 sqft, 4 BD/3 BA, 2 car garage, finished basement. No over the top finishes or fixtures

Coverages per my policy:

Dwelling: $500k - Seems high for this area, even though I know replacement costs more than I think (I work in the construction industry)
Other structures: $50k - We have no outside structures other than a small tool shed that I could replace myself for probably $500
Personal property: $250k - This seems extremely high. I know it would cost more than one would think to replace everything in your house, but I bet we could do it for $50k, maybe $75k max
Addl Living Expense: $100k - We both have family in the area, so in reality during a total loss our expense would be close to zero
Personal Liab: $500k - Necessary? I have a $1M umbrella policy
Medical Payments: $10k

Policy has a $1,000 deductible which I could certainly increase but I doubt that would give me much of a break on the premium. Annual premium is $1291

Any advice would be appreciated!
I cannot recall the exact amount, but we saved a significant amount by changing the deductible to a 1% of the insured value.

In our case, 2/3 of the market value of the home is land - so only insure the value of the house (without land). Ourinsured calue had crept up over the years and was too high. Saved by reducing it. My State Farm agent has a calculator for replacement value and I used the mid-range amount. This saved quite a bit. I suggest the same valuation of house/improvements vs land. $500k seems high, but check with agent. If you go with, say, 1% deductible of the insured value, then by reducing the insured value - the deductible goes down (what happened to us)

I would keep the medical payments so that if anyone (visitor, neighbor, relative, etc.) were injured - you could just have the insurance "take care of it".

I would leave the liability the same - I doubt it costs much.

I agree that the personal property seems high, BUT sometimes these are built into a relationship with the other coverages.

By the way - we pay about half of what you pay for Homeowners.

fishmonger
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by fishmonger » Wed Dec 13, 2017 11:43 am

barnaclebob wrote:
Wed Dec 13, 2017 11:27 am
Personal property is very deceptive. There was a post on Reddit where someone who used to process the claims for personal property explained it very well. They went through a thought exercise on just what is in a typical bathroom and came up with several hundred dollars worth of things to be replaced. Sure you may have accumulated all of your clothing over a decade and at sale prices but what if you have to go buy it all at once and don't have the luxury of time? Additionally on your claim if you write down "digital camera" they will pick the cheapest digital camera on the market to compare to. But if you give the exact specs you'll get paid what you deserve.

You may also want to keep it high because if you have a fire and your house is a total loss you may be able to recover more money in the personal property part of the policy if the insurance company is stingy in other areas.

If I remember correctly the additional building coverage is usually set at 10% of the house value. We had 35k of coverage even though we had no additional buildings.

PSA to everyone: take a photo inventory of your house every few years, especially anything you really care about like tools, kitchen appliances or specialized equipment. You can't just tell the insurance company you had $40k of tools in your garage, you'll probably have to itemize the list.
Good advice. Friend of mine had this very thing happen when his house burned to the ground a few years ago. Very hard to inventory tools, very nice camping gear, sporting goods, etc. His insurer was pretty lenient though at the end of the day

pdanet
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by pdanet » Wed Dec 13, 2017 11:57 am

fishmonger wrote:
Wed Dec 13, 2017 11:05 am

Dwelling: $500k - Seems high for this area, even though I know replacement costs more than I think (I work in the construction industry)
That statement is contradictory. You sense the dwelling coverage is high but you think replacement cost is higher than you think ?

fishmonger
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by fishmonger » Wed Dec 13, 2017 12:05 pm

pdanet wrote:
Wed Dec 13, 2017 11:57 am
fishmonger wrote:
Wed Dec 13, 2017 11:05 am

Dwelling: $500k - Seems high for this area, even though I know replacement costs more than I think (I work in the construction industry)
That statement is contradictory. You sense the dwelling coverage is high but you think replacement cost is higher than you think ?
Not contradictory at all. I think $500k is high, but realize it might not be that high

barnaclebob
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by barnaclebob » Wed Dec 13, 2017 12:18 pm

fishmonger wrote:
Wed Dec 13, 2017 11:43 am
barnaclebob wrote:
Wed Dec 13, 2017 11:27 am
PSA to everyone: take a photo inventory of your house every few years, especially anything you really care about like tools, kitchen appliances or specialized equipment. You can't just tell the insurance company you had $40k of tools in your garage, you'll probably have to itemize the list.
Good advice. Friend of mine had this very thing happen when his house burned to the ground a few years ago. Very hard to inventory tools, very nice camping gear, sporting goods, etc. His insurer was pretty lenient though at the end of the day
It was nice his insurance company was lenient. I can imagine them not wanting to believe that I have 4 sleeping bags worth ~$500 each, 6 sets of skis worth $800 each replacement cost, and a set of $70 a piece chisels that essentially don't depreciate because there is no secondary market for them.

Clueless
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by Clueless » Wed Dec 13, 2017 12:28 pm

I think your premium is very low for the coverage it offers. I would not lower any limits except additional structure (if possible).

Trust me...you want the additional living expenses coverage. After one storm we had to move out of our house, and our policy covered housing for up to 2 yrs. The thought of crashing at someone's house was not appealing to me. I like my alone time. It also covered meals, laundry services, and housing our pets.

Remember when there are mass disasters, there is a shortage of good quality contractors. Demand is high, and prices for everything seems to go up. Build out times take forever. You could be out of your homes for multiple months or a year.

Let us not forget the exclusions for items not covered by the homeowners policy. We had a really nice policy on coverage, but we still paid thousands between the deductibles and items excluded for our policy. I had no idea a fence cost so much. Lesson learned.

Rupert
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by Rupert » Wed Dec 13, 2017 12:49 pm

Clueless wrote:
Wed Dec 13, 2017 12:28 pm
I think your premium is very low for the coverage it offers. I would not lower any limits except additional structure (if possible).
Me too, granted I live on the Gulf Coast. The cost of HO insurance seems to be going up almost all over the country because of the number and size of natural disasters this year. I shudder to imagine what my premium will be when I renew next summer. Your policy looks extremely cheap to me.

JBTX
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by JBTX » Wed Dec 13, 2017 5:38 pm

I could probably save a few hundred a year on home insurance but my insurance company has paid for 2
Hail damaged Roofs over the past 7 years and the payout was very generous so I’m not rocking the boat.

westrichj312
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by westrichj312 » Thu Dec 14, 2017 9:02 am

my place in IL about the same home value, my premium is $771.00 per year with american family. Only diff is I carry a 2500 deductible. I change carriers about every 2 years and get the rate reduced by shopping around that is KEY.

fishmonger
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by fishmonger » Thu Dec 14, 2017 11:56 am

ResearchMed wrote:
Wed Dec 13, 2017 11:13 am
fishmonger wrote:
Wed Dec 13, 2017 11:05 am
So for someone who's on top of almost all financial issues, one I have never really delved into much is homeowner's insurance, both coverages and premiums. I've shopped around on price and generally taken my agent's advice on coverage. I just received a 10% premium increase for my renewal and figured this was as good a time as any. The particulars, and my comments:

Purchased home for $317k in Dec 2016 in rural NH. House is 3,000 sqft, 4 BD/3 BA, 2 car garage, finished basement. No over the top finishes or fixtures

Coverages per my policy:

Dwelling: $500k - Seems high for this area, even though I know replacement costs more than I think (I work in the construction industry)
Other structures: $50k - We have no outside structures other than a small tool shed that I could replace myself for probably $500
Personal property: $250k - This seems extremely high. I know it would cost more than one would think to replace everything in your house, but I bet we could do it for $50k, maybe $75k max
Addl Living Expense: $100k - We both have family in the area, so in reality during a total loss our expense would be close to zero
Personal Liab: $500k - Necessary? I have a $1M umbrella policy
Medical Payments: $10k

Policy has a $1,000 deductible which I could certainly increase but I doubt that would give me much of a break on the premium. Annual premium is $1291

Any advice would be appreciated!
Check with your insurance agent, about a couple of things, including comparing rates with other insurers.

Some of the coverages may be a strict percentage of the base, although I'm not sure about the specifics of what you are describing.
That is, you may or may not be able to adjust the personal property amount.
Also, make sure that the replacement value isn't based upon the "total value/price including the land".

Liability... the umbrella policy will usually require a specific coverage for this.

Did you check on the price with a higher deductible? We upped ours, and it saved a considerable amount.
(Of course, the next year, the furnace had a meltdown :( But we've made up the difference since then, at least.)

We also care about an insurer that pays without all sorts of obstacles... but that can be difficult to determine prior to any claims.

RM
Excuse my ignorance, but your furnace went and you put in a property insurance claim to have it replaced? Isn't that "normal wear and tear"?

Big Snack
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by Big Snack » Thu Dec 14, 2017 4:47 pm

One thing to keep in mind about the Other Structure coverage, this is also where hardscape would be covered in your policy. This could include things like driveway, sidewalks, patios on ground, pools, retaining walls and fencing. If you have a paved driveway, sidewalks and a patio and they get damaged by the fire trucks or construction equipment when the house is rebuilt, this is the part of the coverage that would pay for it.

deikel
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by deikel » Thu Dec 14, 2017 4:59 pm

This thread is interesting, additional question:

Is there something like a 'totaled car' equivalent for houses ?

If you purchased your property (house and land) for 350k and the insurance coverage is 500k - would the insurance not claim the house to be totaled and it would be cheaper to just buy another property instead of fixing it ? Although, what is the junk yard equivalent for houses ?

Or the other way round: Even if your house burns to the ground, there is still value left in the foundation, the utilities brought in, maybe a septic field ect - so should the insurance coverage not be significantly below the purchase value ?

Genuinely curious how this works in real life...
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immidiatly and destroy any copy or remembrance of it.

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dm200
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by dm200 » Thu Dec 14, 2017 5:51 pm

deikel wrote:
Thu Dec 14, 2017 4:59 pm
This thread is interesting, additional question:
Is there something like a 'totaled car' equivalent for houses ?
If you purchased your property (house and land) for 350k and the insurance coverage is 500k - would the insurance not claim the house to be totaled and it would be cheaper to just buy another property instead of fixing it ? Although, what is the junk yard equivalent for houses ?
Or the other way round: Even if your house burns to the ground, there is still value left in the foundation, the utilities brought in, maybe a septic field ect - so should the insurance coverage not be significantly below the purchase value ?
Genuinely curious how this works in real life...
No firsthand experience - thank goodness.

I think that as a policy holder - the insurance company might allow you to take a full payoff, up to the insured limit, for the replacement value of the destroyed house.

Yes - you would not want to have and pay for insurance coverage anything significantly above the "replacement value". The insurance company will not pay more than the replacement value - even if you have a larger policy coverage amount. They do not want to provide a financial incentive or benefit to you for the house burning down.

In our case, about 2/3 of the valuation of our single family house is the land value (only about 6,000 square feet). In September, we reduced the coverage amount quite a bit (and premium went down) to the replacement value of the house.

scifilover
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by scifilover » Sat Dec 16, 2017 10:05 am

Re: Policy limits....all the limits in the policy such as contents are based on a percentage of the dwelling replacement cost. It is a package deal and you cannot reduce them. Before there were HO policies, one had to buy separate policies for dwelling, contents, and liability. This cost everyone more than getting the package deal.

The conditions section in the policy requires you to replace the structure in order to collect the actual replacement cost. The policy provides a lesser amount to fund the reconstruction work.

During the Oakland Hills Fire of the early 1990s almost 3000 houses burned. In 90% of the losses, there was insufficient coverage to replace the structure. The fire was hot enough to burn the concrete foundations. A lot of these losses ended in litigation.
https://en.wikipedia.org/wiki/Oakland_firestorm_of_1991

If you cut a corner on coverage to save a buck, it can come back to bite you.

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samsoes
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by samsoes » Sat Dec 16, 2017 10:14 am

fishmonger wrote:
Thu Dec 14, 2017 11:56 am
Excuse my ignorance, but your furnace went and you put in a property insurance claim to have it replaced? Isn't that "normal wear and tear"?
Furnace "meltdowns" oftentimes result in frozen pipes, which then burst and cause tremendous water damage (which is covered by homeowner's insurance).
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. (Avatar is the statue of Gen. Warren at Little Round Top @ Gettysburg National Military Park.)

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samsoes
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by samsoes » Sat Dec 16, 2017 10:17 am

Get an "all perils" policy, which covers everything unless specifically excluded. A stated perils policy only has specific coverage; all other perils not stated are not covered. Opt for supplemental riders which override an earthquake exclusion and reduce the hurricane deductible which are often much higher than the policy's overall deductible.
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. (Avatar is the statue of Gen. Warren at Little Round Top @ Gettysburg National Military Park.)

talzara
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by talzara » Sat Dec 16, 2017 2:53 pm

ResearchMed wrote:
Wed Dec 13, 2017 11:13 am
Some of the coverages may be a strict percentage of the base, although I'm not sure about the specifics of what you are describing.
That is, you may or may not be able to adjust the personal property amount.
Most insurers will not allow you to adjust the limits for Other structures, Personal property, and Additional living expense. The limits are set strictly as a fixed percentage of the Coverage A (dwelling) limit.

A few companies have begun offering tiered policies in an attempt to undercut the competition. For example, they might sell a basic policy with 5%/20%/20% of Coverage A, and a standard policy with 10%/40%/40% of Coverage A. The savings aren't that large, though. The rate is really determined by the dwelling itself.
scifilover wrote:
Sat Dec 16, 2017 10:05 am
Re: Policy limits....all the limits in the policy such as contents are based on a percentage of the dwelling replacement cost. It is a package deal and you cannot reduce them. Before there were HO policies, one had to buy separate policies for dwelling, contents, and liability. This cost everyone more than getting the package deal.
Fire insurance policies also included contents coverage.

When homeowners insurance was invented in the 1940s, the innovation was not in what it covered, but in the perils that it covered you against. A fire insurance policy only covered your house against fires. Homeowners insurance also covers your house against wind, lightning, water, etc.

talzara
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Re: Homeowner's Insurance - How Do You Evaluate?

Post by talzara » Sat Dec 16, 2017 3:24 pm

deikel wrote:
Thu Dec 14, 2017 4:59 pm
Is there something like a 'totaled car' equivalent for houses ?
If you purchased your property (house and land) for 350k and the insurance coverage is 500k - would the insurance not claim the house to be totaled and it would be cheaper to just buy another property instead of fixing it ? Although, what is the junk yard equivalent for houses ?
dm200 wrote:
Thu Dec 14, 2017 5:51 pm
I think that as a policy holder - the insurance company might allow you to take a full payoff, up to the insured limit, for the replacement value of the destroyed house.
The standard HO-3 policy only pays actual cash value if you decide to walk away from the house. To get paid replacement value, you must actually replace the house.

Think of economically-depressed places, where the houses are worth less than the replacement cost. You don't want people to burn down their own house and then walk away with a check for the replacement cost.

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