Why am I insuring my home for THIS when it is worth THAT?

By
Services for Real Estate Pros with Auto & Home & Life Insurance throughout North Carolina
https://activerain.com/droplet/J5p

There are many questions you will encounter in this life.  Is there indeed, a God?  Would you like fries with that?  Can you believe what they just tweeted?

The other question encountered by anyone providing homeowners insurance these days is the very one that I reference in the title of this post.  Why am I insuring my home for THIS when it is worth THAT?

First, I'll answer it with a lame cliché ... you just don't compare apples and oranges. Ever.

What your house is worth, or is appraised at as of today, may or may not be in alignment with what it will cost to replace your home.  After all, the latter is the reason you have Homeowner's Insurance for in the first place.Beautiful NOLA Home

Allow me to illuminate you as to why the difference:

 If you own a home that is a bit older, matching labor and materials, along with custom woodwork, isn't exactly easy. Folks (artisans) that do this type of work are often harder to find and more expensive when they are found. And the purpose of your Homeowner's Insurance is to replace/rebuild the home you live in, as it exists. That last sentence will become quite popular if you read me going forward.

 It's one thing to value a house already built, it's quite another to take into account the cost of demolition and debris removal before actually rebuilding your house.  Homeowner's Insurance takes those costs into account.  Hence, another difference.

 Supply vs. Demand. Many losses come in large doses. Think Hurricane Katrina. Top-notch Homeowner's Insurance also takes this into account. A storm of some kind can take out an entire neighborhood. So can a fire. So can any number of things. Contractors in that area will charge more to replace those homes, because the demand is up and the supply to correct those things is more than likely down, or not what it should be compared to the normal construction market.  

 Speaking of contractors, and you can ask them yourself… those specializing in reconstruction and restorations often charge more for their services. While you may have a friend or family member in the construction business, rebuilding your home won't be based upon their quote alone. It can't be. The reality is that there is no guarantee that they’ll still be in business when that loss occurs. And the cost of materials is subject to drastic market changes. Much like a commodity. Not to mention the cost to truck that lumber, sheetrock, etc., to your location. It’s subjects to the wild whims of the marketplace.

  And how about these:  local construction costs, amendments to building codes since the home was built, type of construction materials, style of home, fireplace(s), number of rooms, square footage, home improvements, style and type of roof, and how good looking you are.

Okay, kidding on the "good looking" part. But I do offer a number of wonderful credits! Now that you understand, I hope it is understood. While it is rarely a bad idea to revisit your Homeowner's Insurance to ensure you aren't over-insured or under-insured, at least now you'll have a good understanding of what goes into that often misunderstood calculation. And if you need help understanding it… I’m here for you. But for now…

I leave you with this!

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Rainmaker
108,637
Larry Costa
Century 21 Classic Gold, Carver MA - Carver, MA
Realtor, Carver MA Real Estate

I have many properties insured and always feel they are insured for too much. I never can understand why if you have a home worth $300K the insurance company wants to insure it for that.......I'm pretty sure they are not insuring the land it sits on, only the structure. Land can be 30-50% and more of the value of the property.

Sep 20, 2012 02:25 AM #32
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Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Will be back later, hopefully:)

Larry - You are correct in that homeowner's doesn't insure/cover the land, only the home and detached structures.  As far as your other question, I believe this post should help explain the answer(s).

Sep 20, 2012 03:53 AM #33
Rainmaker
434,606
Adam Brett
The Adam and Eric Group - Fullerton, CA
The Adam and Eric Group, Fullerton's Finest

Thanks for this awesome post Jason, you rocked it indeed. Congrats on the featur eas well.

Sep 20, 2012 04:47 AM #34
Rainer
22,661
Spectrum Inspection Group
Spectrum Inspection Group - Las Vegas, NV

Excellent post Jason!  Great advice for homeowners and agents!

Sep 20, 2012 04:48 AM #35
Rainmaker
245,501
Michelle DeRepentigny
Success Realty - Athens, GA
Broker Athens, GA

When my son bought his house a few months ago I had the pleasure of telling him that his bid for the REO was accepted at $54,000 but his insurance quote said that it would cost $190,000 to replace the home and his payment for insurance was going to be almost as much as his princple payment.  Yep, that's the good new, bad news on buying a 100+ year old farmhouse. 

Sep 20, 2012 06:03 AM #36
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Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Jason- congrats on the Feature.  I remember after Hurricane Andrew, insurance required homeowners to have included in the policy the cost for removal of all of the debris.  And I can understand why when you consider the costs of demolition and removal.  I usually call our insurance once a year to go everything we're covered for.  (hey, I've given up trying to read the policies. 

Sep 20, 2012 06:44 AM #37
Rainmaker
1,553,972
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Insurance 101 and reasons not to be a bonehead because disasters can strike fast & at any time.

Sep 20, 2012 08:52 AM #38
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Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Lyn - The only thing worse than being over-insured and paying too much is being under-insured and not getting what you actually paid for.  Sorry to end a sentence with a preposition.  I'm horrible with that:)

Kathy - They (Policies) aren't always easy on the eyes, that's for sure.  

Michelle - Wow!  Not surprising with the age of the house, but still ... WOW!  It happens.

Grazie, Spectrum!

Adam - Thank you, kind Sir!

Renee - I have my moments ;)

Ginger - The premium (cost) doesn't have to be high or low, but appropriate for individual needs.  If the cost is in contrast to the budget, I recommend shopping ... but ensuring if they buy something else, it has the same appropriate coverage, or better.  "Cheapest" is not a selling point for me.  Tends to look bad when you actually need and use the product.

Nan - Yeah, Florida is a different conversation altogether.

True that, Richie.  

Tim - Thanks man!  Been at the trade for three years now.  Just selling it as well now, as of ... "very soon>November".

Charlie - I'll be here all week :)

Bill - YOU get it!

Mike - AHH, toys as well.  In this biz, boats and such are referred to as toys oft times.  Whatever you are insuring, make it appropriate.

Tre - Thank you.  

Setunsky - Agreed.  I had no clue either until I entered the business.

Gita - Excellent.  Hope it helps!

Sheila - Personally, I don't like that answer at all.  Educate, don't dictate.

Debbie - Paying for a hotel and such is a different form and coverage of any homeowner's policy.  Loss of use is how it typically reads, totally different from Replacement Cost.  But totally important none the less.

Endre - Hard to insure land these days, or any day ... for that matter.  You get it, too:)

Dick - Indeed.  In "Freaking" deed.

 

 

 

 

Sep 20, 2012 11:42 AM #39
Rainmaker
925,849
Ron Marshall
Marshall Enterprises - Saint Michael, MN
Birdhouse Builder Extraordinaire

This is one of the best articles on this subject that I have read here in the Rain.  And, you explained it well.  We had a go-around with our agent on this very subject a long time ago, so it is important to know.

Sep 21, 2012 12:00 AM #40
Rainmaker
1,240,187
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Jason:  Great post, but have to tell ya' ... I'm damned darned impressed by the choice of a Talking Heads song included at the end. Well chosen and well done!

Gene

PS:  I Tweeted and ScoopIt'd this ... so worthy!

Sep 21, 2012 06:00 AM #41
Rainmaker
1,202,943
Curtis Van Carter
Better Homes & Gardens Wine Country Group - Yountville, CA
Your Napa Valley Broker Extraordinaire

Jason

Seems like great minds think alike. Just referring to your writing this and showing up on my post to the same. Always nice to hear from you, thanks and cheers cvc

Sep 21, 2012 06:18 AM #42
Ambassador
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Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Ron - Thank you, my man!  Hope your agent was able to explain it well for you.  It is very important to know.

Gene - LOVE the Talking Heads:)  Thanks for the Tweet!  Not sure what ScoopIt'd is ... I'm kind of slow ;)

Curtis - Cheers, my friend!

Sep 21, 2012 06:51 AM #43
Ambassador
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Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

Jason, I thought surely with the insurance gig Burning Down the House would also have been a great choice.  There is so much to be on top of with insurance decisions.

Sep 22, 2012 12:20 PM #44
Rainmaker
544,206
Eric Michael
Remerica Integrity, Realtors®, Northville, MI - Livonia, MI
Metro Detroit Real Estate Professional 734.564.1519

J, as to your initial questions, I'm leaning towards "I'd rather not answer," yes but I'm in training, and what's a tweet? Love the TH song!

Sep 22, 2012 12:49 PM #45
Rainmaker
1,240,187
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Jason:  Go to:  @scoopit on Twitter ... you will see a link and be able to follow it.  Better explanation if you see the site itself ...

Gene

Sep 24, 2012 12:29 AM #46
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John McCormack, CRS
Albuquerque Homes Realty - Albuquerque, NM
Honesty, Integrity, Results, Experienced. HIRE Me!

Jason,  I think this very thing is overlooked grossly by the masses.  I dont think most insurance providers are very good at prodding along their clients either.  Having a home properly insured is huge.  For most their home is their largest investment ever, so insuring it to cover their humble abode and protect against financial doom is paramount. 

Sep 25, 2012 01:22 AM #47
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. 4Terra Land Brokers .. 828-776-0779 Asheville NC
REAL ESTATE RESOURCES & NETWORK - Asheville, NC
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Hi Jason! FAB post and thanks so much.As you say, " What your house is worth, or is appraised at as of today, may or may not be in alignment with what it will cost to replace your home..."

I'm Tweeting this one and FB and Linked In, too.

Sep 28, 2012 03:15 AM #48
Rainmaker
1,132,361
Claude Cross
Homes By Cross, Inc. - Charlotte, NC
Charlotte NC Homes For Sale

Jason - Great post. I have USAA and perhaps they need a call as I rarely look at my bill. The things we over-look may be costing us.

Oct 15, 2012 10:32 AM #49
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Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Excellent post, Jason!  This one deserves a feature!  It's something that most homeowners sign up for and then forget about.  I am encouraging my previous buyers to review their policies in the New Year--and to read this very informative article!

Dec 20, 2012 11:06 PM #50
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Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Grazie, Mrs. Maxwell ;)

Dec 22, 2012 12:34 AM #51
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