Home lost in Palisades fire

[Tahoe Ray]

Maybe if I had enacted ACV, these people would have ACV instead of nothing

If you have ACV in these very highly appreciated areas, you could certainly make a case that it would be sufficient. Probably 80-90% of the value is the dirt, not the structure.

 

[Allen Trent]

If you have ACV in these very highly appreciated areas, you could certainly make a case that it would be sufficient. Probably 80-90% of the value is the dirt, not the structure.

But dirt isn't part of the "Replacement Cost minus Depreciation ", is it? If new house construction is $1M on a $4M market value home built 50 years ago, won't 50 years of Depreciation be deducted off the $1M, not the $4M

 

[Tahoe Ray]

But dirt isn't part of the "Replacement Cost minus Depreciation ", is it? If new house construction is $1M on a $4M market value home built 50 years ago, won't 50 years of Depreciation be deducted off the $1M, not the $4M

That's what I'm getting at. The structure is a tiny percentage of the overall value of the property.

So "losing a 4m home" really costs less than 1m to rebuild. Not saying that 1m isn't a lot of money, just that you'd rather have ACV of that 1m vs zero dollars.

 

[Allen Trent]

That's what I'm getting at. The structure is a tiny percentage of the overall value of the property.

So "losing a 4m home" really costs less than 1m to rebuild. Not saying that 1m isn't a lot of money, just that you'd rather have ACV of that 1m vs zero dollars.

Agree in theory & people would love it at time of purchase & time to pay premiums, but they will flip out at time of builders upselling & overcharging for catastrophe rebuilds. Seeing $1M on a policy coverage amount, but then getting $300k or $700k will still be a pain point. We already have people flip out when their 25 year roof is 30 years old when wind blows it off & roofer gives them a price of $25,000 to put a new roof on & insurance company pays $2,000 ACV because the roof is already past its useful life.

Wont be easy, but better than no carriers offering coverage in the high risk areas. Biggest hurdle will be getting lenders to accept ACV as they are rescued by insurance companies at time of claims, even when someone intentionally destroys their own home. Aggressive lenders before the 2008 housing crisis collected a lot of insurance claims checks when updside down property owners burned or let the bathtub on 2nd floor to destroy their home. Even if homeowner goes to jail, insurer still has to pay the lender off, ironically the lender that may have contributed to the bad loan for the homeowner

Plus, this will cost rates nationally to further go up & other regional insurance carriers to have to leave some states they are in. It will be because the cost of reinsurance & the reinsurance retention limits for the regional carriers will skyrocket causing them to have to stop writing in even midwest states not directly hit by wildfires or hurricanes. National carriers will further spread the risk by charging more in those other states. Many carriers have gotten smart in these high risk states & create subsidiaries they can have go insolvent in catastrophe instead of taking from their surplus in better areas of country

 

[Al3x Lee]

We already have people flip out when their 25 year roof is 30 years old when wind blows it off & roofer gives them a price of $25,000 to put a new roof on & insurance company pays $2,000 ACV because the roof is already past its useful life.

Exactly, this is where planning should come into play. Are they not planning on replacing the roof already at the end of its useful life? It's not the insurers job to pay for a new roof when your roof is past its useful life imo

Aggressive lenders before the 2008 housing crisis collected a lot of insurance claims checks when updside down property owners burned or let the bathtub on 2nd floor to destroy their home. Even if homeowner goes to jail, insurer still has to pay the lender off, ironically the lender that may have contributed to the bad loan for the homeowner

Yes, rampant lending with minimal risk has greatly contributed to housing bubbles.