Seriously, how is the average homeowner able to afford all of these premium increases?

[shawnmwalker]

@Al3x Lee ,

The industry created the unprofitable product. Do they now they need to walk it back with more risk sharing? The answer is yes.

 

[Policy Monkey]

The majority agree with ACV for vehicles, why are houses any different? - It's only different if you see your house as an investment vehicle.

This example is common, but doesn't really make sense. I can easily replace a 20 yo car with another 20 yo car. But I can't replace a 20 yo roof with a 20 yo roof. The only option is a new roof.

Also, no matter how one sees their house, it has always been both a place to live and an investment vehicle.

 

[Allen Trent]

I am not an agent.
I don't understand the ACV Roof portion of your comment above, but with the deductible portion of the comment:

my current homeowners insurance has a $1,500 deductible. Is the conept of your comment suggesting that in the future one might expect to see roof coverage excluded from the $1,500 deductible, and a separate and much larger deductible applied to the roof?

Thanks.

If you are 20 years into a 25 year shingle (80% depreciated & 20% useful life left) & you have a $1,500 deductible & new roof cost is $10,000------you would get around $500. $2000 total claim after 80% depreciation minus $1500 deductible.

Again, nearly identical to how a 2005 toyota camry with 200,000k miles might work. Current depreciated market value might now be $3,000 on the car with a new toyota camry maybe costing $30,000. you have used up 90% of the useful life of the car. you get in fender bender & repair costs are $4,000 to fix the bumper. that is more than the current value of the car, so insurance company will offer you $3,000 minus your $500 deductible, so you get $2,500 but would need $30,000 to go buy a new one with a brand new full life expectancy of a car.

Similar to how it might look & similar to how property damage liability claims are settled where the party damaging your stuff only owes for the market value or depreciated value, not the full new replacement cost of it.

 

[Allen Trent]

I began as multiline agent in 1996. in addition to being given a huge book by my manager called the phone book & polk directory (what a funny guy), I inherited a 100 policies or so. While looking through the files that included tons of smelly carbon printed old policy dec sheets, I saw almost all home policies were Broad perils (limited perils) home insurance & ACV/repair cost policies. Not sure exactly when it happened, but obviously sometime in late 1980s or early 1990s, the insurance industry must have moved into covering homes at Special perils/ open perils & replacement cost.

SOOOOO, historically speaking, for most of time, homes were covered for 7-10 named perils & only for ACV/repair cost, not replacement cost. I can only assume people were handy for the 1st 100 years to fix small stuff & also didnt expect the insurance company to recarpet their entire lower level when they spilled paint on a 12 inch by 12 inch area. But with Special Open Perils & brand new for old, some learned they didnt need to maintain what they had & could get brand new stuff for previously never covered items

IE: at some point, it went from more catastrophic coverage for the big 7-10 things that could happen (Fire, Wind......) to being more of a maintenance policy & even covering forgetting where you put stuff or leaving things unlocked, etc, etc.

I think we are headed back to more risk sharing & more limited scope of what is covered. Otherwise, lots of the smaller regional companies cant stay in business as they cant find reinsurance to buy that will help them in large catastrophic weather events

 

[NY independent]

An ACV policy is unlikely to happen. Fannie and Freddie were recently presented with this at the federal level, and they said no, and they control most of the mortgage lending. IMO, an ACV option is, however, one of the best ways to reduce HO insurance costs. High deductibles do not have meaningful discounts these days. The HO3 and HO5 is too broad for the price, so HO2 and maybe even HO1 should be discussed.

 

[marindependent]

Fannie and Freddie were recently presented with this at the federal level, and they said no,

Yep I am sure they are against it. But Fanny and Freddie are not in charge of financing and completing new roofs and new plumbing fixtures and ripping out Knob and Tube Wiring. The insurers, at least in my home state, have had it. One specific insurer, who shall remain nameless used to take homes in almost any condition, now that insurer is not taking new clients, is nonrenewing 10s of thousands of policies, seeking significant rate increase and the new potential insurers are just laughing at these homes in the old derelict condition.

I get this call almost everyday - "Yes we have knob and tube wiring, but only a little bit, and my electrican says its fine." OK, ask your electrican to isure it.

The Second most common call is the person being nonrenewd with a 25 year old roof that believes they still have 5 years on the roof and want RCV on it. Have Fannie insure it.

 

[Riskfreak]

- "Yes we have knob and tube wiring, but only a little bit, and my electrican says its fine." OK, ask your electrican to isure it.

Lol!!! That's a great line. I'm gonna start using that.