How much homeowners insurance?

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sapper1371
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How much homeowners insurance?

Post by sapper1371 » Thu Jul 11, 2019 8:10 am

I have received about 5 quotes and after answering all of their detailed questions about my house the estimated costs to rebuild are all over the map ($450k-$900k). Is anyone aware of a better way to estimate or should I consider hiring someone to estimate?

I don’t want to be underinsured but also want to avoid being too overinsured as well.

Thanks!

fru-gal
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Re: How much homeowners insurance?

Post by fru-gal » Thu Jul 11, 2019 8:41 am

I have AMICA homeowner's insurance. They sent out a person who seemed very knowledgeable to walk through and estimate the value of the house. They have always treated me well with my other insurance, so I just go with them and I don't worry. (Their estimate was slightly higher than the town's property tax appraisal which claims to be a real estimate.)

If you get a quote from them, be sure to ask if it is a member or non-member quote. Non-members pay less up front, but members do better overall as they get a fat dividend (which you can have automatically applied to the policy, so no hassle.)

When people ask me about AMICA, I always say, think of a company where your Mom is the CEO.

Alan S.
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Re: How much homeowners insurance?

Post by Alan S. » Thu Jul 11, 2019 3:48 pm

Find out what amount of guaranteed replacement cost is provided under the policy you select. A 20% increase over the amount shown for Cov A on the policy is typical. For example, if you insure for 500k and have a 20% guaranteed replacement cost limit, you are actually covered up to 600k.

If you do not want to overpay, you should determine the actual RC as close as you can, then purchase a limit that with your guaranteed replacement cost will equal that amount. If you are subject to catastrophe loss such a forest or brush fires that could result in widespread damage, then in order to get your home replaced with the higher materials and labor costs caused by the catastrophe itself, you should increase the previously calculated amount done without considering the additional catastrophe costs.

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sapper1371
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Re: How much homeowners insurance?

Post by sapper1371 » Thu Jul 11, 2019 7:14 pm

I think part of my problem is that my house was built in 1939 and has a slate roof, original to the house. Maybe I’ll just average all of their estimates for dwelling rebuild then try to find the best deal for that amount of coverage.

Right now that would be about $650k and that nearly 2x of the current market value for my home which seems odd.

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MP123
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Re: How much homeowners insurance?

Post by MP123 » Thu Jul 11, 2019 7:26 pm

Alan S. wrote:
Thu Jul 11, 2019 3:48 pm
Find out what amount of guaranteed replacement cost is provided under the policy you select. A 20% increase over the amount shown for Cov A on the policy is typical. For example, if you insure for 500k and have a 20% guaranteed replacement cost limit, you are actually covered up to 600k.
Yes. I recently shopped my insurance and found the amount of guaranteed replacement cost (sometimes called extended coverage) ranged from nothing to 75% with different carriers. And the amount of extended coverage didn't really correlate with the premiums either so be sure to consider it in addition to coverage A.

erictiger12
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Re: How much homeowners insurance?

Post by erictiger12 » Thu Jul 11, 2019 7:47 pm

I am not sure whether you can select your own amount for replacement cost (RC). I had an all brick house with estimated value of $700K. However American Family had a RC of1.7 million (yes, it’s not a typo) and wouldn’t lower the coverage. Later I switched to AAA which still had the RC of 1.1 million but the premium was lowered from $2300 to $1800 with the same coverage, except RC. I sold the house earlier this year for 680K.

sport
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Re: How much homeowners insurance?

Post by sport » Thu Jul 11, 2019 7:55 pm

It should be noted that replacement cost and market value are two different things. If the value of your property is $XXX in the real estate market, it does not mean that you can replace the structure for that amount. Construction costs for labor and materials can be much higher.

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willthrill81
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Re: How much homeowners insurance?

Post by willthrill81 » Thu Jul 11, 2019 8:04 pm

sport wrote:
Thu Jul 11, 2019 7:55 pm
It should be noted that replacement cost and market value are two different things. If the value of your property is $XXX in the real estate market, it does not mean that you can replace the structure for that amount. Construction costs for labor and materials can be much higher.
Alternatively, in areas where the land itself is quite valuable, RC may only be a fraction of MV.
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Re: How much homeowners insurance?

Post by smitcat » Fri Jul 12, 2019 7:59 am

willthrill81 wrote:
Thu Jul 11, 2019 8:04 pm
sport wrote:
Thu Jul 11, 2019 7:55 pm
It should be noted that replacement cost and market value are two different things. If the value of your property is $XXX in the real estate market, it does not mean that you can replace the structure for that amount. Construction costs for labor and materials can be much higher.
Alternatively, in areas where the land itself is quite valuable, RC may only be a fraction of MV.
"Alternatively, in areas where the land itself is quite valuable, RC may only be a fraction of MV."
+1 - this has been the case everywhere we have lived.

Bruce T
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Re: How much homeowners insurance?

Post by Bruce T » Fri Jul 12, 2019 9:09 am

erictiger12 wrote:
Thu Jul 11, 2019 7:47 pm
I am not sure whether you can select your own amount for replacement cost (RC).
I am not sure about lowering the RC per erictiger12's experience, but I was easily able to raise it with Liberty Mutual ... they had low-balled RC significantly (by 50%) so even their 20% buffer would not have covered... the agent offered she was trying to make sure I was not over-insured (a sentiment I appreciate)... but a later home appraisal indicated a higher RC, and the premium change to raise to the higher RC was fairly modest.

daheld
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Re: How much homeowners insurance?

Post by daheld » Fri Jul 12, 2019 10:07 am

Bruce T wrote:
Fri Jul 12, 2019 9:09 am
erictiger12 wrote:
Thu Jul 11, 2019 7:47 pm
I am not sure whether you can select your own amount for replacement cost (RC).
I am not sure about lowering the RC per erictiger12's experience, but I was easily able to raise it with Liberty Mutual ... they had low-balled RC significantly (by 50%) so even their 20% buffer would not have covered... the agent offered she was trying to make sure I was not over-insured (a sentiment I appreciate)... but a later home appraisal indicated a higher RC, and the premium change to raise to the higher RC was fairly modest.
State Farm absolutely allowed me to lower the replacement cost of my homeowners.

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Re: How much homeowners insurance?

Post by abuss368 » Fri Jul 12, 2019 7:17 pm

Replacement costs and market value are two entirely different things.
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Iridium
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Re: How much homeowners insurance?

Post by Iridium » Fri Jul 12, 2019 7:56 pm

sapper1371 wrote:
Thu Jul 11, 2019 8:10 am
I have received about 5 quotes and after answering all of their detailed questions about my house the estimated costs to rebuild are all over the map ($450k-$900k). Is anyone aware of a better way to estimate or should I consider hiring someone to estimate?

I don’t want to be underinsured but also want to avoid being too overinsured as well.

Thanks!
That is really strange because I am pretty sure that there are only a small number of companies that make RC estimator programs and the insurance companies just license those. Did their quote include or can you ask to get the inputs that they plugged into their program? Perhaps some companies interpreted your input differently when having to describe your finishes as average vs superior, etc.

If you feel that estimating the actual replacement cost is difficult, it may be worthwhile to ask for a higher extended replacement coverage percentage (50 or 75% would be dirt cheap). That is what it is there for: everyone made their best guess of replacement value, but it turned out to be insufficient.

You will want to double check the insurance company's inputs to ensure that they reflect actual conditions in order to avoid possible coinsurance penalties on any claims.

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sapper1371
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Re: How much homeowners insurance?

Post by sapper1371 » Fri Jul 12, 2019 8:04 pm

Iridium wrote:
Fri Jul 12, 2019 7:56 pm
sapper1371 wrote:
Thu Jul 11, 2019 8:10 am
I have received about 5 quotes and after answering all of their detailed questions about my house the estimated costs to rebuild are all over the map ($450k-$900k). Is anyone aware of a better way to estimate or should I consider hiring someone to estimate?

I don’t want to be underinsured but also want to avoid being too overinsured as well.

Thanks!
That is really strange because I am pretty sure that there are only a small number of companies that make RC estimator programs and the insurance companies just license those. Did their quote include or can you ask to get the inputs that they plugged into their program? Perhaps some companies interpreted your input differently when having to describe your finishes as average vs superior, etc.
Not sure, some of the questions were common and others were different with each company. I think their estimators add a lot of expense to older houses because it’s not all cookie cutter and building codes have changed which might make reconstruction more difficult.

Iridium
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Re: How much homeowners insurance?

Post by Iridium » Fri Jul 12, 2019 9:50 pm

sapper1371 wrote:
Fri Jul 12, 2019 8:04 pm
Iridium wrote:
Fri Jul 12, 2019 7:56 pm
sapper1371 wrote:
Thu Jul 11, 2019 8:10 am
I have received about 5 quotes and after answering all of their detailed questions about my house the estimated costs to rebuild are all over the map ($450k-$900k). Is anyone aware of a better way to estimate or should I consider hiring someone to estimate?

I don’t want to be underinsured but also want to avoid being too overinsured as well.

Thanks!
That is really strange because I am pretty sure that there are only a small number of companies that make RC estimator programs and the insurance companies just license those. Did their quote include or can you ask to get the inputs that they plugged into their program? Perhaps some companies interpreted your input differently when having to describe your finishes as average vs superior, etc.
Not sure, some of the questions were common and others were different with each company. I think their estimators add a lot of expense to older houses because it’s not all cookie cutter and building codes have changed which might make reconstruction more difficult.
Old houses shouldn't be that much more expensive to rebuild than new houses. The rebuild will have to be code compliant regardless of whether the insured home was. Similarly, I am not sure how much 'not cookie cutter' really matters. It is not as if the insurance company was going to rebuild your entire subdivision. So, new vs old doesn't seem to much matter; would be pretty much a one-off either way for them. Only thing I could imagine that would really drive up the cost to build the replacement is if the existing home was built with some technique or materials that aren't common anymore, and the modern equivalent has qualities that are materially different from the existing structure, such that creating a replacement for your home would require highly specialized contractors/materials.

The insurance companies are not making up the replacement cost based on what feels right. They have all bought one of 2 or 3 programs that estimate the cost to rebuild based on inputs that the insurance company plugs in. They are probably not asking for the inputs literally, as some of those inputs are up to some level of interpretation that a home owner cannot really be objective about. For the bidding process, it may not much matter, but I would certainly ask to see the rebuild cost report from whichever company you decide to go with, to look for obvious errors and aggressive interpretations. That should help prevent any chance of getting hit with a limit too low penalty (also known as coinsurance). Then buy extended replacement coverage of at least 50% to protect yourself if their estimates are off by a bit.

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sapper1371
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Re: How much homeowners insurance?

Post by sapper1371 » Sat Jul 13, 2019 9:21 am

Iridium wrote:
Fri Jul 12, 2019 9:50 pm
Old houses shouldn't be that much more expensive to rebuild than new houses. The rebuild will have to be code compliant regardless of whether the insured home was. Similarly, I am not sure how much 'not cookie cutter' really matters
Have you priced a slate roof or copper gutters lately? It can make a huge difference if the materials are not typically available anymore. Trying to replicate an old home is much more expensive than building new.

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TomatoTomahto
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Re: How much homeowners insurance?

Post by TomatoTomahto » Sat Jul 13, 2019 9:42 am

sapper1371 wrote:
Sat Jul 13, 2019 9:21 am
Iridium wrote:
Fri Jul 12, 2019 9:50 pm
Old houses shouldn't be that much more expensive to rebuild than new houses. The rebuild will have to be code compliant regardless of whether the insured home was. Similarly, I am not sure how much 'not cookie cutter' really matters
Have you priced a slate roof or copper gutters lately? It can make a huge difference if the materials are not typically available anymore. Trying to replicate an old home is much more expensive than building new.
Chubb and PURE estimated the RC as roughly 2x what we purchased the house for. That’s what happens when everything is decidedly not cookie cutter: fieldstone, lots of copper gutters and flashing, sound proofing, large windows, slate&metal&rubber roofs, etc.

Both companies overestimated the contents of the house, since that is apparently a percentage of house insured amount.
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