<p>Just got my homeowner’s renewal from Nationwide. Every year they raise the coverage amount significantly. I used to call every few years and have them move it back down. This time I happen to have a very recent appraisal (doing a refi), but I called and they insurance lady said “we can’t adjust that figure - it’s based on your square footage”. I told her I wanted the agent himself (have never met him) to give me a call. We’ve had one claim - new roof due to hurricane wind damage - they paid easily and quickly, so I’d like to remain with them but don’t want to be ripped off.</p>
<p>Hmmmm… what do y’all think?</p>
<p>Appraisal value: $325K (says new-basis $350K)
Homeowner Coverage: $445 ($405 dwelling + 40 detached garage)</p>
<p>I feel that this is too high, but I realize if my home burned down I WOULD want them to fully pay to rebuild.</p>
<p>Any thoughts?</p>
<p>The value of the home and the cost to rebuild are 2 very different things.</p>
<p>In your case, it sounds like you could buy a different house on a different lot for less than you could rebuild. But your insurance has to cover the cost to rebuild.</p>
<p>If you really want to argue, you need to get a construction company to give a rebuild estimate, and send that to the insurance company. The appraiser gives you the fair market value of the house, but that is not what you want.</p>
<p>I work for an insurance agent in Texas, but no dealings with Nationwide. The amount of insurance on a house is usually reflective of the cost to REBUILD the home, not the fair market or appraised current value. I’m sure Nationwide has some kind of estimator software that they use to determine the replacement cost. You might ask to go over that to make sure they are using the correct data. The company I work for figures the replacement cost, but the customer is allowed to choose a lesser amount of coverage if they want.</p>
<p>Apples and Oranges. The Refi appraisal is biased low to protect the refi bank (in case the borrower defaults). The homeowners insuranced is biased high (because the insurer is more or less obligated to repair/replace, whatever the cost).</p>
<p>My insurer has a pretty comprehensive replacement cost model that my agent sat down and went through with me – asked everything from the height of the ceiling in each level of my house to interior wall composition % (drywall, lath&plaster, …) and the actual number of windows, as well as whether any of the windows were non-standard. I felt a lot better about the coverage after we finished that. I had pumped it up a few years ago, but the insurance company’s recommendation was lower. When we finished the estimate it turned out to be really close to my by-guess-and-by-gosh number working from 125% of the construction cost/square foot for custom (but not luxury) homes. </p>
<p>My folks owned a rental that (mostly) burned, which was about the pessimal situation. I can handle a big deductible, but I want to make sure that in the event of a serious loss that I’m fully covered except for the deductible.</p>
<p>Generally insurance companies want to insure you for the rebuilding costs and want you to rebuild. I just heard today that some policies will let you take the check and move somewhere else if you prefer, but that apparently isn’t the norm. I have to fill out a fairly detailed checklist from which they calculate the replacement cost of the house. They are always quite apologetic when they raise my rates, but I’m not at all convinced that we could rebuild for as little as they think - certainly not as solid a house as we are in now - with real 2x10s on both levels, a nice brick veneer, stone foundation (well that probably won’t burn down), plaster walls (I’m okay with replacing with gyp board), oak floors etc.</p>
<p>Focus on what it would be to REBUILD/REPLACE the house and contents…not what things are selling for in your neighborhood. Often insurers don’t see the inside of your house either, so if you have expensive finishings and you would replace those finishings you need to cover that. For example, we put in plaster walls…not drywall…and i would certainly want to keep plaster walls if our house burnt down so i would adjust the per square foot cost to rebuild accordingly. Fortunately my H has a builder’s license so pretty much knows what the going rate for stuff is and we just sit down at renewal time each year and review what’s going on in our small corner of the world regarding building costs. For the rentals, I keep it at the low end as the rentals are crap anyway, and if they burned down I only want money to replace lost rent while we rebuild and enough to throw up a replacement which would be better than what is there because it would be new. In one case I believe the land is more valuable than the building so you can adjust your insurance up and down (within reason) to fit your circumstances.</p>
<p>Be careful - you are right at the 80 percent co-insurance requirement. If you don’t insure for at least 80 percent your claim payment can be substantially reduced! Insurance company estimates can be low - especially if there is a local disaster such as a tornado or hurricane. Disasters drive up rebuilding costs.</p>