Determing Replacement Costs

[Guest]

Hi all,

I've been shopping around for new homeowners policy - dwelling +fire for my home which I'm renting out. Calling various insurance agencies I get a wide range of quotes on what my replacement cost will be. They range from $200, 000 to $270,000. I ask for 100% replacement cost policy quotes including building code upgrade and they all seem to have some overage dollar amount in their quotes too.

So here's my question: If this burns to the ground and the cost to rebuild it exceeds the policy limits, who is responsible to absorb that additional cost?

If you think the answer is me then please answer this next question: How do I determine the replacement cost for the house?

thx

 

[djs]

The answer is you, but the agent should guide you on this.

Problem is, you aren't pricing today, you are pricing in case something happens in the future, so its a bit of a guessing game. An agent should be able to tell you what he used to come up with the reconstruction cost and tell you if it includes demolition and debris removal, etc.

These numbers vary a LOT by the area you are in, so its hard to give much advice here, but your agent should go into this in detail. At the end of the day, we all use a software package to determine this coverage, some assumptions will vary from carrier to carrier, but with the same input, you should have similar coverages. From $200K to $270K, they used different input, unless they included the extended replacement cost coverage.

Dan

 

[NCAgent]

Replacement cost estimators are exactly that: systems that give ESTIMATIONS to replace the home.

Rather, and this is the way it was taught in my CIC class as well, this is the MINIMUM amount that the insurance company believes it will cost to insure the home. If you want to go higher you can.

Here is the breakdown:

If you go too high on coverage, you pay some extra premium.

If you go too low on coverage, you either don't pay for the entire loss OR you deal with co-insurance provisions, meaning that losses that COULD be covered end up not doing it.

Result: It's better to be OVER insured than under-insured.

Some states allow extended limits such as 125 or 150% of coverage A, or some even allow "uncapped coverage A" or sometimes known as "guaranteed replacement cost."

Realistically, there isn't going to be a way to know the exact amount until it comes time for a total loss. Go with the higher numbers because at the end of the day you need adequate protection, and it's almost impossible to be over-insured whereas being underinsured is very easy.

 

[indmedins]

In Florida, the calculation I use to get a rough estimate on replacement cost for a masonry construction is to multiply the heated square footage by $100 and add $25K more for an attached garage and $25K more for an in-ground pool. Wood frame homes generally equate to a lower limit than this. More often than not, this calculation is pretty accurate. It gives me a starting point in running quotes from multiple carriers to determine who might have the best rate for my prospective client. I do use a replacement cost estimator to finalize my recommended limit. And, I can attest to djs's comment about some assumptions varying from carrier to carrier.

 

[Guest]

IN MY state, a couple of my carriers REQUIRE us to use $125 per square foot to get the replacement cost.

Sit down with an agent, NOT a 1-800 number and go thru the estimator WITH them, so you add to it as you need...

 

[iiinycboi]

my carrier requires me to use a min. of 215 per sq foot. this is the min. you need to purchase, you can go over but not under.

 

[NCAgent]

Some of my carriers require a minimum of $100/sq ft. Not as bad as what you guys face but a lot of people in construction say that is rather high based on their experience of doing things at 60-75/sq ft.

 

[jmr30183]

I'm an Independent P&C agent and represent six companies who offer Homeowners policies. Each of them specifies in their underwriting guidelines what methods or estimating software is acceptable for determining 'replacement cost' on a home. All of them offer some variation of "Guaranteed Replacement Coverage" as a very inexpensive optional endorsement. Usually the policy language will specify that Guaranteed Replacement is capped at 125-135% of the Coverage A (Dwelling) amount shown on the policy. But they also stipulate that the agent must calculate the replacement value using their approved method(s) when issuing the policy for that extra coverage to be valid.

I would suggest calling at least two local independent agencies and discussing your situation and concerns. Some, if not all, of the companies they represent should have software to calculate the accurate replacement cost on your home. They can also make sure that you have guaranteed coverage above and beyond policy limits, just in case.

 

[b61mack]

215 sq ft, Welcome to New York...

 

[VolAgent]

215 sq ft, Welcome to New York...

That is insane. I saw an billboard recently for America's Homes or whatever they are called. Standard plan for something like $90/sq ft. I saw one a few years ago in a different part of the state, something like $125/sq ft.