Market Value Insurance?

[larson32]

Have a client looking for an insurance policy to cover the market value of his home. Risk is located in an area susceptible to forest fires. If the forest burns but his house is saved, it will obviously lose sale value.

Clients insists he's seen a policy before that will cover the loss in market value before/after said fire. I imagine there may be some sort of financial instrument (though possibly not a homeowner policy) as the mortgagee would surely want to protect their financial interest in a case like this.

Anyone know if this policy exists or what it is called?

 

[Hoosier]

I don't think I've ever seen a market value higher than a replacement cost on a home. It is usually the other way around. If such a thing exists, it has nothing to do with a traditional homeowners insurance policy.

 

[agentinsouth]

Have a client looking for an insurance policy to cover the market value of his home. Risk is located in an area susceptible to forest fires. If the forest burns but his house is saved, it will obviously lose sale value. Clients insists he's seen a policy before that will cover the loss in market value before/after said fire. I imagine there may be some sort of financial instrument (though possibly not a homeowner policy) as the mortgagee would surely want to protect their financial interest in a case like this. Anyone know if this policy exists or what it is called?

That is dumb.... If the replacement cost is $100,000 and the house is insured at market value of 150,000, the insurance company is only going to pay $100,000. It is illegal to profit from insurance.

 

[insurance1822]

Well first off never say never. I had a similar situation where an insured insisted upon a coverage that I was 100% sure didn't exist & sure enough...it did.

In this situation I'd have to think he's misinterpreting something he heard of in the past or from somebody else. It could be as simple as somebody explained ACV poorly in the past & that's what he took away from it.

Encompass has extra converges on their elite plan like mortgage extra expense & cash out option on total losses. Maybe somehow some carrier has some boutique endorsement for this who doesn't have a presence in your Market much so you're not aware.

Chances are he's wrong but because I've been caught with my pants down before saying "there is NO way that coverage exists.." I'm always hesitant to say that.

 

[Andle]

Sounds like a reasonable request. He wants to hedge his market value and for the right price I imagine someone and/or some company will take that bet.

Illegal to profit from insurance, huh?

 

[djs]

That is dumb.... If the replacement cost is $100,000 and the house is insured at market value of 150,000, the insurance company is only going to pay $100,000. It is illegal to profit from insurance.

Actually, replacing the home, even if it is above market value in cost, is not profiting from insurance. It is a requirement of most mortgages.

Yes, insurance companies will pay the reconstruction cost of the home, regardless of market value, as long as you are properly insured. Just the way it is.

Also, almost all of the better homeowner policies are replacement cost policies (with some specific exceptions), not actual cash value policies. You do tend to have a betterment situation in a lot of homeowner losses. Not sure I would call it profiting, but clearly, betterment is allowed. In the land of auto insurance, it can happen, but it a lot more rare.

Dan

 

[nyc2phi]

The way I imagine this working is a very basic policy with tons of exclusions. Some catastrophic event happens such as your example a major fire in the neighborhood. Home was worth 200K now it's only 150K. You pay some absurd deductible but at the time of the sale the insurer will pay the difference in value.

I don't think this has to do with the home actually having physical damage, just has to do with the value of the home and the reason why it dropped.

However I've never heard or seen this before

 

[agentinsouth]

The way I imagine this working is a very basic policy with tons of exclusions. Some catastrophic event happens such as your example a major fire in the neighborhood. Home was worth 200K now it's only 150K. You pay some absurd deductible but at the time of the sale the insurer will pay the difference in value. I don't think this has to do with the home actually having physical damage, just has to do with the value of the home and the reason why it dropped. However I've never heard or seen this before

I am 100% sure there is not a "market value" H03.

 

[nyc2phi]

I am 100% sure there is not a "market value" H03.

"

Again if you read OP's post his claim example has nothing to do with property damage on the home. Only the value of the property it self.

This has nothing to do with an HO3 policy. What HO3 policy do you know of that will pay a claim with no damage to the home itself and obviously no bodily injury in this case?

I think everyone is seeing the word "market value" and immediately thinking he must be talking about actual cash value property coverage..he's not.

 

[agentinsouth]

" Again if you read OP's post his claim example has nothing to do with property damage on the home. Only the value of the property it self. This has nothing to do with an HO3 policy. What HO3 policy do you know of that will pay a claim with no damage to the home itself and obviously no bodily injury in this case? I think everyone is seeing the word "market value" and immediately thinking he must be talking about actual cash value property coverage..he's not.

No- I do understand. It is the same concept as if it were a beach house... It just does not/ could not exist for so many reasons.