Consumption and Real Estate
Hazard insurance question. When deciding how much “dwelling” coverage for our new house, how much do I need?
Question : Hazard insurance question. When deciding how much “dwelling” coverage for our new house, how much do I need?
I’m asking this because I got a quote that was a little higher than I wanted to pay. This was someone trustworthy who has access to all the companies, and he says this was the best rate, so it’s not a question of getting a quote from someone else. Here’s the deal…he put a value for dwelling that I thought was a little high. I’ll use different values for simplicity…the dwelling coverage he put was $ 130k. The purchase price was only $ 120k and the land value is $ 20k, so wouldn’t $ 100k for dwelling be sufficient?
We’re looking at 2 things that would cause this to even be relevant…total loss fire or total loss tornado. In either of these events, I believe we’d still be left with the concrete foundation and we’d still have the land, so I think we could rebuild a comparable house for $ 100k.
Does it make sense for me to only get $ 100k dwelling coverage?
In regards to the first answer, I understand that the coverage is for the rebuild cost, but what I was saying is I believe a new home could be built for $ 100k if the site was already prepared and the concrete foundation laid. I guess it’s pretty subjective.
And the values I used are not the real prices…I didn’t want to say how much the house cost nor is it relevant to the question. But I would guess 300/sq.ft might be considered quite a deal in some areas of California!
hazard insurance quotes
Best answer:
Answer by car253
No. Dwelling amounts are determined by how big your home is and how much it would cost to rebuild. Your home amount does not matter and the value of the land does not matter.
The only thing that matters is the amount it cost to build your home.
Since your agent must already know how much it cost per square foot it cost to rebuild in your area, it sounds like you can trust that person.
Your lucky. In California costs are around $ 300 a square foot.
-
-
#3 written by stephenweinstein 1 year ago
Following a tornando or fire, it costs money to remove the wrecked house parts, before you can begin to rebuild. The total cost of to have a usable house again is more than just the cost of building the new one.
Also, the purchase price may be less than the cost of rebuilding, especially if the house is old. Purchasing an old house costs less than a new house of the same size, but the rebuilding cost is the same.
-
#4 written by Margarita D 1 year ago
Most insurance agents have access to software from a company called Marshall, Swift Boech that assists us in determining the cost to rebuild your home based on local buildings costs, i.e. we plug in the address including the zip code, the square footage, types of building materials used such as brick vs. frame, roof type, number of skylights, size and materials of decks, porches and a full description of the amenities of the property such as type of kitchen (cabinets, countertop, appliances, flooring, wall coverings, etc.). The software then crunches all the data and gives us a cost to re-build which also includes soft costs (architect’s fees, permit fees, builder’s markup, etc.) and demolition and removal of all debris.
Unless you have a full estimate from a local licensed and reputable builder outlining and guaranteeing that he can re-build that house from the ground up in the event of a total loss, I would accept your insurance agent’s figure. Remember that your purchase price is based on the market value and has absolutely nothing to do with the cost to re-build which can be lower or higher than the market price.
In addition to this the provision in your policy that gives you the replacement cost coverage can be disallowed if you have chosen to insure the home for less than the re-construction cost. If you are underinsured at the time of a loss and did not insure for the reconstruction cost from the beginning the company will penalize you by reducing your claim payment by the same percentage you are underinsured. For example if they stated you should insure the house for $ 150,000 thousand and you only insure it for $ 100,000 and subsequently suffer a $ 60,000 loss then they will only give you a check for $ 39,000 which is $ 60,000 minus 1/3 or $ 20,000 less your deductible which is $ 1,000 equals $ 39,000. Whereas if you over insured the only danger is that you overpaid by $ 30 or $ 40 a year–under insuring can lead to tragic consequences.
If you are still concerned that you are overpaying due to being over insured, I would suggest that you purchase the policy and then have the agent request that the company do an inspection of the house to determine the re-construction value–companies are usually happy to do this since it assures the accuracy of the data.
I hope this helps. Good Luck!
- Comment Feed for this Post
You have got some really good answers so far. Footings, foundations and land are not insurable, so don’t enter that into the equation. If it’s an average home, call a local contractor or two and ask them the cost to rebuild based on square footage costs. Muliply by the # of square feet (debris removal is usually included in the homeowners policy, as a separate limit, but no cost). You need to have either 80 or 90% of that amount (based on the policy, it’s called a co-insurance clause). Be careful, however, there are somethings it’s better to just not argue with. Does the home have asbestos? Is it “out of code”, part of an HOA? Your agent is a professional, listen to him. My SF agent even runs a MSB (Marshall/Swift/Boech) anytime I ask him to, and he does it for free. MSB gives you the cost to rebuild, and that’s the cost you need to know.