Now where I am, many of the older homes are the exact opposite. RC can be twice as much as market value if not more. So many homes can be underinsured here if the agent is only writing to market value. Of course many companies also try and catch this with inspections and their own calculation of RC.
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So much this. I live in rural Iowa, houses sell for $30k-$60k, and the low end gets you a solid, unupdated house, the higher end, at least in two of the towns, gets you a nice home. I bought my 2 story, built in 1910, for $30,500. It's 9 foot ceilings on both floors, wood floors on a portion of it, and then we did a ton of updating. I doubt I have $50k in it, but replacement cost on it probably pushes $250k. That's why we insure for replacement cost and not market value.
In fact, we had a recent agency acquisition, and I bet we have increased dwelling coverage on 90% of the book, due to how poorly they were insured. The company they used didn't have any inflation guard, which certainly didn't help the cause.
Underinsured Homes in Wealthy Areas
- Thread starter marindependent
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Because I know how you work I know you understand the differences.
The mudslides in SoCal I believe are going to be most similar to the Oakland Hills fire of 1991. Bet there is a lot of that in the Napa fire as well.
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Re: underinsurance. If the construction costs in the Bay Area are in line with the real estate prices, then many homeowners are probably underinsured, even when ruling out the cost of the land. The best thing, I suppose, would be to quote coverage closer to current building costs. An instructor has written that maybe homeowners should get their own replacement cost estimate and be notified that they are responsible for determining what that is, so that they can't come back on agents/carriers.
When I was an agent in California the flood insurance I sold was mostly for the risk of mudslide, & some beach houses with wave action risk. We haven't heard the end of the mudslide total loss issues in Santa Barbara/Montecito. The limit of coverage is $250K for the federally insured flood/mudslide (caused by rainstorm--not landslide) program. On the East Coast, expensive beach homes can get expensive flood insurance over and above the basic $250K to cover more of the replacement cost of the home. I assume they could have in California, also. Like those stayed home in the voluntary evacuation area, the risk of mudslide and need for flood insurance to cover may have seemed remote.
When I was an agent in California the flood insurance I sold was mostly for the risk of mudslide, & some beach houses with wave action risk. We haven't heard the end of the mudslide total loss issues in Santa Barbara/Montecito. The limit of coverage is $250K for the federally insured flood/mudslide (caused by rainstorm--not landslide) program. On the East Coast, expensive beach homes can get expensive flood insurance over and above the basic $250K to cover more of the replacement cost of the home. I assume they could have in California, also. Like those stayed home in the voluntary evacuation area, the risk of mudslide and need for flood insurance to cover may have seemed remote.
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Yes, homes do sell for more than the cost to replace them here, that is generally true.
However, $1.2MM market value 1500 sq foot home with a $310K Coverage A when rebuilds can often be $300 a square foot?
I see this all the time. Yes I do lots of education...
However, $1.2MM market value 1500 sq foot home with a $310K Coverage A when rebuilds can often be $300 a square foot?
I see this all the time. Yes I do lots of education...
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marindependent, I noticed there have been many responses, but no one actually answered your question. I am here in San Mateo Ca, and most homes are terrifically underinsured. Most agents use the standard cost estimator that is used throughout the country, but does not apply to this area where building cost is $300 to $450 a sqft, which of course has nothing to do directly with the cost of land, as some of the responders here don't seem to understand.
I bring this up to agents all the time. I had lunch with a Farmers agent the other day. Farmers is the biggest offender of underinsurance and all around junk coverage in this area. I just told him point blank that just about ever Farmers policy I look at is terribly underinsured. On top of that Farmers is overpriced. So of course I hope he isn't doing that, because on top of the client being poorly taken care of, the agent doesn't stand a chance against me as I come in with better pricing and better coverage.
The fact of the matter is, that any agent that writes those kinds of coverages, minimum coverages, things like that, doesn't care about the client. They just care about making the sale. When you then threaten the only thing they do care about (themselves) then you might see some action.
I bring this up to agents all the time. I had lunch with a Farmers agent the other day. Farmers is the biggest offender of underinsurance and all around junk coverage in this area. I just told him point blank that just about ever Farmers policy I look at is terribly underinsured. On top of that Farmers is overpriced. So of course I hope he isn't doing that, because on top of the client being poorly taken care of, the agent doesn't stand a chance against me as I come in with better pricing and better coverage.
The fact of the matter is, that any agent that writes those kinds of coverages, minimum coverages, things like that, doesn't care about the client. They just care about making the sale. When you then threaten the only thing they do care about (themselves) then you might see some action.
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