It's Your Responsibility To Get Properly Valued Homeowner's Insurance

Speaking of disasters, our resident claims adjuster wants to remind everyone,

….the insurance company is not at fault if someone doesn’t obtain the full value of their home from insurance. Knowing the value of owned property, and properly insuring that for the correct value is the responsibility of nobody but the insured.

Many states… have what’s called a ‘Value Policy Law’, which means that in the case of a total loss, the insurance company MUST pay the full value of the POLICY. Remember, this is the policy. Not the full value of the property (if the policy is less than the property.) And if you overinsured your property for just this matter, you might be in for a surprise too (because you are not supposed to profit from insurance!)

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  1. fluiddruid says:

    So, in other words, the insurance company screws you if you’re underinsured, and, if you’re overinsured. Sounds “fair”.

  2. humphrmi says:

    Oh and just wait until you actually file a catastrophic claim! I had friends who filed because their house burned down. It was determined to be an accident. Insurance rebuilt, then canceled them. They still had a mortgage so they had to carry insurance. Ended up paying huge premiums with a subsidiary of Lloyds (the high risk insurance market) just to keep their house.

    ‘Course that’s just one of probably hundreds of thousands of sad insurance stories these days.

  3. stopNgoBeau says:

    Why is it the insurance companies “fault” if you fail to insure your property for the correct value? Furthermore, how can you claim that your property was worth more than the policy if you didn’t feel the need to insure it for that (obviously you undervalued it)? Especially if its not around for appraisal after the catastrophe!

  4. jamar0303 says:

    How do you get your property appraised accurately, then?

  5. robotprom says:

    I’m getting homeowner’s quotes right now, and the quoted value is all over the place. I’ve had quotes that came back with a value of 140K, and then got another quote with a value of 175k. Whenever I question where the insurance company got their valuation, I get the run around from the agent.

    I did spend the $9 to get an AccuCoverage report. Supposedly AccuCoverage factors in materials cost, with the details of the structure, to arrive at a number you should insure to make sure you have enough (but no too much) insurance.

    It’s [www.accucoverage.com] if anyone’s curious.

  6. doormat says:

    So what happens if you’re overinsured and there is a big event (earthquake, flood, etc) and many homes need to be rebuilt and the prices of materials goes up?

    What would be adequate for a single home fire isn’t adequate in a large scale disaster.

  7. imVertigo says:

    I just closed on a new home. The property was “appraised” at $225K based on local comparables and current market trends in the area. I got my insurance through USAA, they established the limits of coverage for a total loss at $322K based on the local building market and what they estimate it would cost to replace everything if it was a total loss. No run around; seemed pretty straight-forward to me. I wasn’t very involved at all with determining what the limits of coverage were. I guess I just had to press the EASY button.

  8. MercuryPDX says:

    I always do an annual insurance review with my agent. We go over coverages on my house and car to make sure they’re current.

  9. sleze69 says:

    remember that your house increases in value with age so that if you bought your house for $250k and insure it for that, in 5 years you will be underinsured without an adjustment.

  10. Sudonum says:

    The software that most adjusters use ([www.marshallswift.com]) to determine rebuilding costs is usually pretty generous. It’s also the same software that most real estate appraisers use. Our adjuster after Katrina even asked us if we could wait a couple more weeks for him to file the claim because he said there was a new update coming out that would help us maximize our claim.

  11. ihaveinputonthis says:

    I ran into this issue, thankfully outside the context of a disaster. We were having our home renovated 5 years ago and after it was complete I did a review of my insurance. The renovations cost approximately $170K all told. I checked and my insurance company had us insured for $120K for replacement costs for rebuilding the house. I was assured after giving them the stats on my house and them putting it into their calculator (there was a scripted list of questions about the house) that I was adequately covered. The rep made the case that we would not have to rebuild the foundation, just what was on top of it. I asked the rep how I was going to rebuild the whole thing for that price if the renovation alone cost that much. She was nice about it and helped me jig things to increase the “value” of the home. Afterwards I thought it was funny. I had called to pay more money on my policy and the company was discouraging it. Much later I started to think that maybe it had to do with limiting their exposure. Anyway this article brought it all back to mind.

  12. BigNutty says:

    We video tape our home and all our belongings each year and then put it in the safety deposit box at the bank.

    As stated above, a regular meeting with your insurance agent to keep updated on the value of your home is mandatory. I bring sales prices of comparable homes sold in the neighborhood to help.

  13. Aladdyn says:

    This is the way to do it without having to trust insurance companies and evaluators. Get quotes from contractors on what it would cost to rebuild the kind of home you have as it exists now. Factor the appropriate costs for replacing your belongings. Add the two together and add in some extra for a safety margin and there you go.

  14. target38 says:

    re: SUDONUM

    you’re incorrect. Most insurance companies use xactimate ([www.xactware.com]) for adjusting.

    Allstate uses MSB, whereas traveler’s, nationwide, USAA, Amica, state farm, etc use Xactimate.

    One major difference between the two systems/programs is in how complete of a scope/ user friendly xactimate is compared to MSB.

    For example – say you are replacing baseboard.

    xactimate’s line item will include all applicable components required to replace baseboard per Linear foot – the base, labor to install, material costs (nails etc) stain/paint.

    MSB – if you are the adjuster you have to enter each of those variables.

    The major issue comes when an adjuster forgets a component or two here or there with MSB, then tries to settle with the insured for less than what is truely fair given industry standards as applicable to their claim.

    There is another pricing guide out there called blue book, but at least in texas very few if any insurance companies use it – the pricing is a bit generous I think.

  15. regexp says:

    Every two years I reevaluate my policy and have it adjusted. My house is covered for how much it would take to build assuming a complete loss. Model and serial numbers of all equipment and pictures of furniture is stored in a safety deposit box. Extra coverage is purchased for specific items (retaining walls, computer equipment).

    I’ve been through a complete loss of a home. The insurance company stepped up and we dealt with all the issues. All I have to say to those bashing insurance companies. Its -your- responsibility to know what your policy covers and what it doesn’t. Get off your ass and understand it.

    I also care much less about physical belongings after the original loss so it also comes down to what your priorities are.