Reconstruction Cost Estimate Went Down! Reduce Coverage?

[tedcab]

I have a Guaranteed Replacement policy where the company lowered the reconstruction cost estimate at renewal. They're asking the policyholders if they want to keep the dwelling coverage as-is, or drop it to the new (lower) reconstruction cost. Thoughts?

What things would you consider when deciding whether to drop to match the new estimate, or sticking at the slightly higher original dwelling coverage?

 

[Accelerated]

It is always good to be a little over insured. Better to be absolutely sure you don't end up having to pay a co-insurance penalty in the event of a total loss.

 

[nyc2phi]

Try getting a quote from a different carrier to see what their replacements cost is coming in at.

A lot of carriers provide something called expanded replacement cost which would give you an additional 20-50% in coverage in the event of a total loss. Something like this could be beneficial if you are concered.

 

[djs]

If the carrier is offering the lower replacement coverage and they correctly identify your home characteristics, then you will be okay from an insurance perspective to lower the dwelling value.

Double check that it says guaranteed replacement cost coverage though. In many areas of the US, that type of policy has gone the way of the dodo bird. In other areas, they are still sold. Guaranteed replacement is wonderful, extended replacement is good.

Check with your bank though, they may require the higher coverage. This is an issue mostly in high value home areas where loans far exceed the replacement value of the home.

If its an agent from a different company offering the lower coverage, be careful.

Dan

 

[Milkman1265]

How does the renovations and updates play in this? If they lowered the coverage but when its time for claims, the adjust see they go new granite kitchens, some expensive moldings and tiles.

What is the replacement cost at now? Who determines the actual replacement or can they say we will rate it at "average" house?

 

[tedcab]

Thanks for the good responses.

Unfortunately, this is the only carrier in the state that offers Guaranteed Replacement that I could find, so I can't get a quote from another carrier.

Looking at the RCE, the home characteristics are accurate and were updated after the last renovation. It's never easy to tell the difference between the different grade levels, but the number of rooms, square footage and house features are all listed. The RCE runs about $650k, on a ~3000 sqft home.

 

[Accelerated]

Thanks for the good responses.

Unfortunately, this is the only carrier in the state that offers Guaranteed Replacement that I could find, so I can't get a quote from another carrier.

Looking at the RCE, the home characteristics are accurate and were updated after the last renovation. It's never easy to tell the difference between the different grade levels, but the number of rooms, square footage and house features are all listed. The RCE runs about $650k, on a ~3000 sqft home.

Depending on what state you are in, that could be on the high side, or it could be just right. Average homes across the nation generally cost $90-130/SF to construct, with those figures reflecting standard finishes such as carpet, vinyl, laminate, drywall, paint, laminate counter tops, standard cabinetry and so on.
If your home has upgraded features, such as hardwoods, tile, oversized baseboards, crown molding, vaulted or tray ceilings, wallpaper, granite counter tops, etc., then the replacement cost could easily reach $150-200/SF on average, more if you are in a high cost of living area (parts of CA and NY are good examples of high cost of living areas in which the labor rates are much higher than the median national average).

 

[Milkman1265]

first thing i thought, this guy must be in nyc because its around 200 per sq ft here for most brick properties