Is anyone else experiencing this homeowner's insurance problem?

Question

Our homeowners insurance doubled this year. The cost is really impacting our ability to pay the premium. Every company we have talked to insist that we insure to replacement cost which of course drives the premium through the roof. They say that replacement cost of our home would be over 350,000. We live in a home that is 140 years old and I agree that there isn't enough money to replace the character of this home. We live in the Midwest. We are not in a flood plain and have never turned in a claim in the 16 years we have lived on this property. My question is this. Can we legally insure this home for just the amount that we owe on it? Are there any companies out there that will do this?
I don't mind paying a fair premium but I do mind paying for disasters across this country in which I had no control over.

engineer..I agree with you but right now we are forced to watch every expense since my husband's job was outsourced. We are just trying to find a way to keep our property until he is employed again, short of putting it up for sale.

Answer 1

Many people experience what you're experiencing.

Yes, there are companies out there that will insure your house for market value, or "flat rate". Can you do it legally? You'll have to check your mortgage documents, to see if they require you to insure for full replacement cost.

Keep in mind, a "market value" policy is much more expensive than a replacement value policy, and at the time of the claim, you get "it works" not "what it used to be like". That means you get peel & stick vinyl instead of tile or linolium, no wood trim, paint instead of paper, drywall instead of plaster, and NO MATCHING.

For a flat policy, the rate is through the roof. When you have a partial loss, they'll pay up to the policy face value. (Most losses are partial losses - heck, most losses are under $60,000, so that first $60,000 of coverage costs the most.)You have to get this coverage through someplace like Lloyds of London - and again, you don't get valued on REPLACEMENT, but IT WORKS.

For pricing examples: OK the market value of your house might be $200,000. Replacement cost is $350,000, and your mortgage balance $100,000.

Your replacement value policy probably runs around $1300. A market value policy would cost you about $2700, and a flat policy for $100,000 maybe $4,000. Oh, and the flat policy isn't going to cover as many causes of loss, either.

A state farm, allstate, or farmers agent is NOT going to be able to give you the "alternative" policy types. You'll have to go to an independent agent.

When someone comes to me, asking for quotes for something like this, I charge them $100 brokers fee, to be applied against the cost of the policy if they end up buying it from me. This covers the time it takes me to do the quotes. Because it's NEVER cheaper, and it's NEVER even close to the same premium, the coverage is worse, it's not in their best interest to switch to a company NOT regulated by the state insurance department, and when people talk about wanting to lower their insurance limit, what they REALLY mean, is they want to lower their insurance COST. I've never sold one of the "alternative" policies I've quoted, except when no company was willing to give a replacement cost policy.

So, if you really want to lower your insurance cost . .. take a $5,000 deductible on your homeowners policy. It should give you a credit of about 35%, if you've currently got a $250 deductible.

Answer 2

There are a number of reasons for this issue - you're certainly not alone in this. But here's why:
1) Construction methods are much cheaper now than they were 150 years ago - your older home is in a # of ways much more expensively built.
2) Construction materials and labor costs are skyrocketing worldwide; not just for New Orleans & Iraq but also China & India. (Also, contractors themselves have in many areas been hit with huge insurance premiums.)
3) Rebuilding your home to value (w/in 80%) also would include (depending on your state's insurance reg) debris removal, rebuilding to code, fire department charges, etc.
If you don't insure to value, you could be on the hook for thousands of dollars!! These charges would be completely unrelated to rebuilding or repairing your home.
4) Because of reason #3, agents & companies will be afraid of being sued because they didn't give you the coverage you needed; a plantiff's attorney could put an agency out of business or file a class action against companies that sold policies with inadequate coverage.
5) To save money on your insurance, make sure your home repairs are up to date; be certain you're getting all the discounts for alarm systems, retiree discounts, etc.
6)Maintain and improve your credit rating - studies have shown that people with poor credit ratings file more claims (and more expensive claims, for both auto and homeowners). Companies therefore charge you more (or turn you down for coverage) if your credit is spotty.
You're probably not paying a whole lot more because of disasters in other areas of the country - policy rates are pretty much set state by state, based in part on the factors I listed above.
You probably have a really nice, well-built home, that you've spent years of your life and tons of money to maintain. Why skimp on covering such a valuable asset? It's a bit like "saving money" on the cheapest parachute or the cheapest rock climbing gear you can find.

Answer 3

Insure for replacement value only. There is no other way. It's proportionate throughout the policy so whenever there is a loss you will suffer the difference in the percentage there as well.
However, there is good news. Today in the casualty business you have to think catastrophic. So, what you do is take a high deductible. Take one as high as $5,000, but at least you will know that any loss will be paid in full thereafter because you are insured to replacement value. Understand? There are no reputable companies that will insure you the way you are proposing.Good luck.

Answer 4

although i am sure there is an agency out there that will do this for you, it is not advisable. the cost of your insurance may be high, but the cost of a total loss on an acv policy would be higher in the long run. i will NOT write a home on acv in my office, its just asking for problems. raise your deductible higher to lower the cost and keep your property insured at replacement

Answer 5

Sure, you can insure for what you owe. However, in the event of a fire disaster, you may not get what you need to repair the structure. Do you REALLY want coverage which will prorate every single item needing repair in the event of such a fire. If you insure for 50% of replacement value, that's about what you will get if you have a claim.

Answer 6

Why would you want to insure for only the amount you owe? That leaves you with the loss of all your equity should your home ever burn down or otherwise become a total loss.

Answer 7

Under insuring your property is not advisable.
But try www.moneysupermarket.com
i myself found good insurance deal here.