Homeowner's Insurance (1 Viewer)

[Jay H]

Hi, I'm applying for Home Owner's insurance through NJ Manufacturing (I have an auto plan from them), and they ask for various costs for insurance for Dwelling.. Now they say don't use the selling price. Should I put the appraised value? It is supposed to be the cost of replacing the dwelling, which obviously the selling price isn't really accurate.

Jay

 

[Jeff Ulmer]

Most insurance companies base the replacement cost on a per square foot basis for the area you live. You want to find out what the cost average is if you were to rebuild what you have.

If you have a 1000 sq.ft. home, and the cost per square foot is $100 per, the replacement cost is $100,000.

The appraised value may or may not be in the right ball park depending on the age of the property.

 

[Dennis Nicholls]

Don't forget....

...land doesn't burn.

You generally exclude the value of the LOT.

 

[Jay H]

Thanks for the replies, my house (a ranch style) is about 1100sf, not including the basement or the deck.

Dennis, from the MLS report, they list land value and appraised value, so yes, the appraisal that I have from 2004 is solely the house.

Jay

 

[Jeff Ulmer]

The thing to watch with the appraisal is that it is based on the age and condition of the house, not its replacement value. A 90 year old, neglected 1000 sq.ft. house, and a brand new house of the same size would not have the same appraisal, but both would cost a similar amount to replace today. That is the cost the insurance company is looking at.

 

[Jay Taylor]

The cost to remove the damaged home should be added to the replacement cost.

You might want to contact a builder in your area and find out how much it would cost to remove the remains of your home after a disaster and then rebuild with a same sized home.

I live in tornado alley. After every storm that damages property the news crews interview homeowners that had inadequate insurance. Part of this is due to not increasing the amount covered with inflation, and part is because they didn’t figure how much it would cost to remove the wreckage after the storm.

 

[Dennis Nicholls]

Jay's right...have you taken a load of debris to a dump lately?

 

[Mort Corey]

Prices on everything from concrete to lumber to steel have increased quite a bit in just the last couple of years. The base figuring of X per square foot that a company used in the past may not be sufficient today.

Another thing to consider, depending on the age of your house, is an endorsement that covers ordinance and law changes. Some places have changed building codes dramatically. Example: Your house has single pane windows but if you want to get building permits to rebuild they are required to be double or triple pane...higher cost. Lots of stuff like that happens and the endorsement is cheap.

Mort

 

[Jay H]

Thanks for the insight, all good... I called up the company and they just gave me the company line, using the appraised house value.. I will have to consider what you said here, I might want to up the value a bit though she said I can always modify the Dwelling costs in the future. Plus, I plan on going solar, or geothermal or something to get off using fossil fuels, which from what I've heard will increase the value of the dwelling. I asked whether a solar panel or geothermal pipes, etc, is considered part of the dwelling or "other structure" and the lady told me that would be part of the dwelling. That is good because standard amt for "other structure" is 10% of the Dwelling.

Jay

 

[Mort Corey]

Just a reminder Jay....it matters not what the person on the phone says about anything. What matters is what's on paper...ie what the policy says. When in doubt...doubt everything

Mort

 

[Jim Sentry]

The appraisal should also show the rebuilding cost, and the policy should also have an inflation adjustment.

Riders to the policy should cover contents and then you can add special riders to cover special items, like your HT gear.

 

[Jeff Loughridge]

You're also going to want to include a rider to cover the increased cost of meeting current or future code requirements.

 

[Jay H]

Hey, guess I'll resurrect this thread.

My mortgage company told me (kind of after I applied.. oops) that I have to get dwelling costs for either my Mortgage amt or "guaranteed replacement value" which seems strange given the advice given to me here. My house is nowhere near the amt I had to get a mortgage on because my land is sooo much valued more than my house and of course, the cost I paid for the house and land is way more than it is appraised at. (thanks to a crazy real estate market here in NJ). Anyway, is that common to all mortgage companies or is it just mine? I put down for the dwelling the appraised value of the house alone plus some more based on advice I got here, now it seems I have to change it to something about 5 times what my house is appraised at. Is this normal?

Jay

 

[Jim Sentry]

On the second page of the Appraisal it should show the value of the land and the value of the structure, which is based on current rebuilding costs.

What is the value of the structure and your mortgage amount.

The insurer is only concerned with your rebuilding costs while lender is concerned with paying off the loan.

 

[Bob Graz]

My experience is that the insurer typically wants the homeowners policy to cover the mortgage amount.

 

[Jay H]

Bob is correct, it seems my mortgage company wants the mortgage amt (it doesn't matter if the house is a run down piece of crap, if you paid $500,000,000 for that piece of crap, that's what they want for the dwelling amt.) My insurance company does not do "guaranteed replacement value" either. I'm sure I could build the same house for way less than what I had to write down for the coverage amt.

Jay