Is your home under insured?
A client contacted me this week and was curious as to what the going rate was for construction costs (price per sq ft). My contractor, Les Soltes, told me that he has seen numbers as low as $200 a foot, but “you wouldn’t want to live there”. My client was reviewing his insurance policy and wanted to be certain he had enough coverage. He has an amazing home with gorgeous woodwork; in the event his home burnt down, it would cost a fortune to recreate much of the detail found throughout his 1920’s character home.
I thought, the answer was “replacement cost coverage”. I contacted my insurance company and learned that my replacement cost coverage is not actually replacement cost, but 150% of the insured amount. It is very confusing. Now, I think if my house burns down I may be under insured; I have my insurance company checking it out.
I contacted another insurance company and was told nearly the same thing; the person I spoke with didn't think "unlimited" replacement cost coverage existed in California. Determine the cost per square foot to rebuild your home – that is what you should be insured for. The replacement cost appears to just be a “pad”. You don’t need to have the land insured.
I thought, the answer was “replacement cost coverage”. I contacted my insurance company and learned that my replacement cost coverage is not actually replacement cost, but 150% of the insured amount. It is very confusing. Now, I think if my house burns down I may be under insured; I have my insurance company checking it out.
I contacted another insurance company and was told nearly the same thing; the person I spoke with didn't think "unlimited" replacement cost coverage existed in California. Determine the cost per square foot to rebuild your home – that is what you should be insured for. The replacement cost appears to just be a “pad”. You don’t need to have the land insured.
Trackbacks
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11/7/2008 8:06 AM
Los Angeles Real Estate Blog wrote:
After the Northridge earthquake, the insurance industry suffered major losses. Guaranteed replacement cost meant that although the policy might have a limit of $500,000 for the dwelling, the insurance company was obligated to pay to repair the home even if it took more than $500,000. Most homeowner’s policies sold today offer only extended replacement coverage which provides coverage up to the dwelling limits specified in the policy plus an additional amount of up to 20 to 30 percent more. Are you under insured? Many homeowners are. When homeowners remodel they often neglect to increase their insurance coverage. ... -
11/18/2008 11:32 AM
Los Angeles Real Estate Blog wrote:
After the Northridge earthquake, the insurance industry suffered major losses. Guaranteed replacement cost meant that although the policy might have a limit of $500,000 for the dwelling, the insurance company was obligated to pay to repair the home even if it took more than $500,000. Most homeowner’s policies sold today offer only extended replacement coverage which provides coverage up to the dwelling limits specified in the policy plus an additional amount of up to 20 to 30 percent more. Are you under insured? Many homeowners are. When homeowners remodel they often neglect to increase their insurance coverage. ...
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