Have you been able to find any information on per square foot construction costs for your area and level of finish? I assume that would be based on historical costs, though, so the value might be somewhat backwards looking, particularly with recent materials price increases.

I guess the other thing is what options do you have if you don’t agree with them? Say they’ve quoted you at $200 sq ft and a builder tells you $300, where does that leave you? Can you pay for higher coverage? I’ve always been ok with the estimate so I don’t know.

I'm not sure how much time or effort is worth spending. You could get other quotes if you think you're paying too much or to calibrate what your existing insurer is doing. Or, ask the current company how they determined the amount.

You can be sure your insurance company is well familiar with a range of building costs per square foot in your area, for the appropriate building style and type/quality of facilities your house has. Your agent likely is too. It's essential because insurance companies don't want their customers to be under-insured. Staying on top of replacement costs on an area by area basis also allows them to tick up coverage levels when needed and earn a larger premium.

Reference to what it cost 20 years ago isn't likely of much use. Reference to the property's market value may or may not be, it probably depends on the area. I can imagine in some areas replacement cost is less than market value (true in my area because of high home prices) and in others, it's lower. Building contractors are aware of that dynamic too, higher value houses are much more expensive to build per square foot than lower value ones.

We recently (maybe 3-4 years ago) switched, had to fill out a form, I believe they sent an assessor, and they came back and told us how much they'd insure it for. The good thing with this company is, regardless of how much they insure it for, they agree to pay full price for a replacement even if it's greater than the assessed value they put on the policy. Nice!

"Assessed value" is a property tax term and may or may not bear a relationship to fair market value or replacement value. For people in California, "assessed value" is the price paid at purchase with an annual increment of about 1% per year. Houses here have historically gone up by much more than that so for most people from Year 2 onward, assessed value is out of kilter with market value.

In my case, because I've owned my primary home for over 20 years, I think my "assessed value" is less than 1/3 or the market or replacement value.

Replacement cost is often a feature of home insurance.

I would never accept a reduction in coverage for a lower premium. The only thing I would do to get a lower premium is to consider increasing my deductible as you then know what your "penalty" is in getting a lower premium.

Replacement cost is the actual cost of rebuilding your home at todays cost of construction and there are different levels of construction - standard, custom and luxury. You can actual google cost of construction in your area. I would get the definitions of standard, custom and luxury (Might be different terms in your area) and the cost of construction and then talk to your agent.

As some of you know - we lost our house in a fire August 2020.

Our insurance policy renewed in October 2019. We are adequately insured

Lumber started to skyrocket in January 2020.

Our fire was August 2020 and because of the lumber increase and general increases in construction due to the pandemic resulting in difficulties in getting trades because the construction market went nuts here, we are now, technically, underinsured.

Fortunately we have Guaranteed Replacement Cost and because we were adequately insured at the beginning of our term, we'll be fine.

Paying for rebuilding if it costs double what your insured for is called "Double Indemnity." Most polices don't do this any more and it's NOT grandfathered in. My policy has a 20% indemnity clause.

Insurance companies keep a "price-per-square-foot" to rebuild on file. You can over ride their estimate to rebuild and ask for higher coverage amounts. The cost of the land is not included, Some policies include "Trees or landscaping".

In order for YOU to determine building costs.....well...it's an educated guess.

We live in the same general area as Elmer; i.e., the San Francisco Bay Area. Here the lot valuation is a very high percentage of a house's sales value. So what matters for insurance purposes are labor and materials cost - both of which are higher than average here.

That's on an every-day basis. In a catastrophe/disaster, one has to expect prices to spike even higher.

About two months ago we (finally) looked over our insurance policies. I asked our agent what replacement costs per sq. ft. currently are. She said as of May 2021 in our neighborhood replacement costs are estimated at $420/sq. ft.

Spouse and I decided on a quote basis of $450/sq. ft. to compare from several carriers. We're not in an extreme fire danger (WUI/Wildland Urban Interface) area. But it'll be interesting to check next year after the 2021 wildfire season has ended, to see whether replacement costs continue going even higher.

Nicole, that's not what double indemnity is.

In the US there is life insurance, there's also travel health and accident insurance, also accidental death insurance. Whole life and term, and untold combinations, flavors, and hybrids.

A life insurance police with double indemnity combines different types. An example, a person gets a standard life insurance policy combined with an accidental death policy for a face amount of life insurance of $500,000 of coverage. When that person dies, the life insurance policy pays his named beneficiary $500,000. Should the person suffer an accidental death, there's double indemnity, so the payoff is $1 million. 2X, or double.

But there is something like that. I don’t recall the name or the percent but when I bought my last policy they said this is our estimated replacement cost, and it’s covered for up to X% more. I think 20 as Nicole said. I remember feeling comfortable with it. I figure they know what they’re doing or the banks wouldn’t put up with it.

food, that could be a policy for replacement cost if in excess of the insured amount, limited to some amount of X% more.

Even if a policy covered replacement cost but with a ceiling of double the amount of coverage, it still wouldn't be referred to as "double indemnity" because as the expression is used, the "double" part is part of the coverage and is triggered by an event, not by subsequent circumstances. .

If you have a house with $750K of coverage but with a replacement cost feature, a double indemnity provision would give you $1.5 million if it burned down, no matter what the rebuilding and replacement cost turned out to be. That's not how property insurance works.

Right, like I said there’s something like what she was describing but different name. Googled it, ”extended” will cover up to a set percentage over the estimated cost. I believe that’s what I have. “Guaranteed” covers the complete rebuild regardless of cost.

I agree with blfenton, if you want to reduce your premium, increase your deductible, not your coverage.

Elmer...ok.. Extended replacement cost. It's a percentage that is paid beyond the insured amount listed on the policy. (That's the term we used at AAA when I was a home policy claims adjuster. Maybe it was an incorrect term applied to what we were doing...? ) I know NOTHING about life insurance. And.....I know of NO policy that gives double the policy amount for claims....any more. It was NOT grand fathered into policies. Please check with your insurance company if you think it still applies to your policy. Annie...I hope it still applies...?

Quote:

Definition: Indemnity means making compensation payments to one party by the other for the loss occurred. Description: Indemnity is based on a mutual contract between two parties (one insured and the other insurer) where one promises the other to compensate for the loss against payment of premiums.

As always, the KT is great at helping! Thanks!

I've decided the problem with home insurance is that you have to insure the entire house as though it will be a total loss...when that's least likely to happen. You can't insure a *percentage* at full replacement value, so that if your kitchen burned or a tree fell on your MBR or porch, you could be 'made whole' to restore just those parts. You can't insure specific areas at full value either. I'd insure my kitchen and bathrooms and self-insure the garage and the porch!

It's unlikely that my house would be completely destroyed, and if it were, it wouldn't make a lot of sense to rebuild it at today's costs. You can buy a similar house, including the land, for about two-thirds of what it would cost to rebuild this one. However, what choice would I have? Wouldn't we need to rebuild to collect the insurance, even if we were selling? I don't think I have the stamina to rebuild, anyway!

I wonder what are the most common claims an insurance company services. How many are 'big ticket'? How 'whole' are claimants made, given reductions for depreciation?

I made a claim when a large limb fell onto and through my roof during Sandy. Although the hole itself was small, the adjuster thought the roof wouldn’t look good with either a patch or just that section replaced, and wrote it up as a complete roof. The interior damage was also generously appraised. I was more than happy.

As I recall, they provided 80% payment up front and the rest when I provided receipts showing the work had been done.

Check your policy for what happens if you don’t rebuild. Maybe you get the replacement value and then you can sell the property. I don’t know; I’d ask the agent and confirm on the policy.

Homeowner’s insurance is very cheap for the coverage it provides. If you can save a few bucks with a higher deductible great, but I wouldn’t skimp on coverage.

I wonder what are the most common claims an insurance company services. How many are 'big ticket'? How 'whole' are claimants made, given reductions for depreciation?

There are policies that don't depreciate, for instance, electronics. They provide you with a current, updated replacement. Depends on the policy.

My most frequent claim: Blown down fences. (fences are shared, so you get 50% of replacement cost. If it was under $2K we'd rarely send anyone to drive by and get a visual.)

chisue, on the topic of insuring a structure itself, I'm not sure it would be workable to do it piecemeal - so much for this room, so much for that. Excluding items or occurrences is different. Insurance for earthquake or flood coverage, riders for expensive possessions, and the like need separate policies and separate premiums. Not part of a standard homeowners policy.

food, it's the nature of how the insurance business works that explains why some coverage seems expensive and other coverage, less so. What insurance companies do is pool risks - they don't agree to cover a customers losses because they have deep pockets or kind hearts. What they do is charge a large number of customers to provide coverage. The more and more diverse, the better. Their experience and statistics tell them how much to expect to pay out in claims (under normal circumstances) across their customer base each year. The sum of expected claims, plus operating costs, plus a profit element, determines premium charges and rate differences for different characteristics of what's being insured.

Claims on homeowners insurance tend to be infrequent, that's why the cost is usually moderate in most circumstances. In places where claims are more frequent or of a particular nature to be expected, premiums are higher (like high crime areas). All insurance companies do the same and like medical insurance companies, regulators and applicable laws require them to have certain levels of extra reserves. Also, many insurance companies buy what's called "reinsurance" to spread their risks with others and help cover catastrophic or unforeseen levels of claims.

We live in an area at high risk for hurricanes. It's difficult and expensive to procure Homeowner's insurance here. A majority of people insure their homes with the Massachusetts equivalent of FEMA. We kept our homeowner's insurance plan with Met Life when my husband retired. It's through his company's group plan and they have to keep us on. We have been to local agents but they can't find us a better rate, although we have switched our auto policies. We have a $40,000 dollar wind deductible!