Replacement Value for Home Insurance

[Mike Robinson]

Our house insurance is up for renewal and we have been solicted by another insurance company. Our present insurance company estimates replacement costs $270,000 and the other company estimates $387,000. This for a 1300 sq ft house with a basement that has 1000 sq ft finished. I phoned a local contractor and he said he charges $250 per sq ft.

Should i have the house appraised? I don't want to be underinsured.

Opinions?

 

[lncoop]

Re: Replacement Value for Home Insurance

How long have you been with your current insurer? I would think the first step would be calling your agent and asking him/her about it. It's not at all uncommon for folks to find out their insurance was adequate once upon a time but no longer is. In fact, It's considered prudent to get an "insurance checkup" periodically to make sure your coverage still fits. This applies to all coverage, not just homeowner's.

 

[rbh]

Re: Replacement Value for Home Insurance

Are the insurance companies including the contents with those prices???

(remember you live in BC, thats Bring Cash. )

 

[aspeck]

Re: Replacement Value for Home Insurance

250 per sq ft, I'd be finding another contractor! But then different markets, different rates. I don't think you would need a full appraisal, but a "drive-by" approximate appraisal would not be a bad idea, since the 2 insurance companies are so far apart. Do you have a friend in the real estate business who could give you a "ball park" figure on your house so you would have a better idea?

 

[BuzzStPoint]

Re: Replacement Value for Home Insurance

I questioned this when I looked for insurance for my house.

I was told the difference is the replacement materials that would go into a house. If your house gets totaled the cheaper replacement would probably cheaper materials. Hollow doors and not solid, cheap floors and carpet, cheap windows. Things like that.

You were also on the right track calling a contractor. I would call a few more and tell them you are calling for insurance reasons. This way they'll give you the insurance claim rate they would charge.

With my current home, I went lower. They bid me a higher replacement because undernigth about 3 -4 floors I have wood floors. More then likely not repairable. Also have one nice fire rated 6 panel commercial door I put in my kitchen. My higher replacement cost would have replaced the wood floors and replaced all doors in the house with fire rated and better doors.

 

[nikon]

Re: Replacement Value for Home Insurance

I'm a little biased as I'm an appraiser, but ya you should probably get an appraisal done. We typically don't include a replacement cost unless asked, so ask for it up front.

Or use what we use

https://www.swiftestimator.com/default.asp

Input all the information and it'll give you replacement cost values. $10 per transaction.

 

[joed]

Re: Replacement Value for Home Insurance

You want a rebuild appraisal NOT what your house is appraised to sell for. It could cost more to rebuild than to buy. Also the lot will still there so you don't count that cost.

Also don't forget the contents.

 

[dockwrecker]

Re: Replacement Value for Home Insurance

+1 to that. Since I don't know what your house is constructed of or the finishes (AND the contents) its pretty tough to establish replacement value, especially since you're betting on current market costs and conditions. Does it burn down 10 years from now and are you willing to pay a premium to anticipate the future loss? $250 a foot would pretty much build the Taj Mahal in most markets today. What are you willing to pay for is the question, and what are the contents worth in a total loss to you? That's your #.

 

[Brewman61]

Re: Replacement Value for Home Insurance

More to complicate this issue- many insurance policies will allow the maximum to be exceeded by a percentage. Say your policy max is $200K- they'd cover up to $250K, assuming a 25% overage factor. Is your house a standard builders grade or does it have a lot of extras? Granite counters, maple cabinets, bamboo flooring, lots of expensive upgrades? That all factors into what it'd cost to rebuild.
Also, consider that MOST homeowner claims will be for things like storm damage- new roof, siding, etc.......
Also pay attention to any limits on detached building, jewelry, guns, liability, etc......\
One other big gap in many policies is sewer backup. Typically they're not covered at all unless a rider is purchased.
And not many cover floods. Storm damage and sewer backup are probably most common claims, and typically don't bump up to the max coverage. Total loss due to a REALLY bad storm or fire is relatively rare.
It's not easy to come up with a pat value, is it?

 

[Mike Robinson]

Re: Replacement Value for Home Insurance

Thanks for your replies

Just to clarify, I am not refering to market value. I am refering to the cost of rebuildng the house in a total loss.

I called the broker and told him about my concerns and he has agreed to review our coverage and will get back to us.

 

[TilliamWe]

Re: Replacement Value for Home Insurance

Mike I am in the same situation. My house was built in 1930, and has "all" the original oak woodwork throughout. I paid $80,000 for the house, but the replacement cost value is over $400,000! I shopped around, and got a company to quote me a "functional replacement cost" policy. It wasn't any less expensive than my current policy, so I didn't change.
Your current company may have a policy like that. Good luck.

 

[Bigprairie1]

Re: Replacement Value for Home Insurance

The replacement costs for insurance purposes are what has driven real estate up in a lot of provinces including Saskatchewan and Manitoba. (I'm not sure about the U.S on all of this). Even tho' the markets in some of those places doesn't warrant higher home value the insurance cost now to insure it and replace pushes the values up. There is no way to have someone build a reasonable house these days for $80,000 all-in...unless their wages are $5/hr to do it.
I knew that the build costs were definitely over $150/ft2 several years ago but I wasn't sure if they gone up to $250/ft2....but that can't be too far off lately.
.....now you've got me thinkin' about my house Mike!!
BP

 

[puddle jumper]

Re: Replacement Value for Home Insurance

We just did this and what we did was take pitchers of all the new home improvements and made shure we had complete replacement insurance. What got us going was a company phoned us and low balled the insurance company we deal with now. Our people told us you get what you pay for.