by travershort » Wed May 27, 2009 09:01 pm
i have a-1 replacement cost insurance on my house that was a total loss. however my insurance company said they wont rebuild like structure, and they just want to pay policy limits. :idea:
Posted: Wed May 27, 2009 09:40 pm Post Subject:
They consider replacement cost but will never pay more then the policy limits. It appears that you under-insured the home over all. If the amount of the insurance is 80% or less then the value of the home, the policy may also only consider ACV instead of RCV (this is the co-insurance level). This clause is in the policy to prevent people from obtaining limits low enough to address most losses (except a total loss of the home) but still getting a RCV policy. RCV is offered with the intention that a premium will be charged for the entire value of the home. It may not matte in your case as it's possible that the limits on the policy are lower then 80% of the homes value so even an ACV payment is more then the policy limits.
Posted: Thu May 28, 2009 09:39 am Post Subject:
Travershot, your situation clearly shows the importance of knowing what exactly is offered in the policy. You never actually read the definition of replacement cost but thought that you would be covered no matter what.
The only type of replacement cost policy that would have covered the cost of re-construction at any rate was the ‘guaranteed replacement cost’ insurance but these plans aren't available in reality. The normal replacement cost plans would have a policy limit and would release the limit when the cost of re-construction exceeds it. This type of plan however would cover the additional expenses.
~Jeremy
Posted: Thu May 28, 2009 06:48 pm Post Subject:
Travershot, your situation clearly shows the importance of knowing what exactly is offered in the policy. You never actually read the definition of replacement cost but thought that you would be covered no matter what.
But if you really think about it, of course the policy limit comes into play. If not, I'd lower my limits to $1. :DPosted: Fri May 29, 2009 09:06 am Post Subject:
Who set your limits? Did you decide or did your agent come up with the amount? My old agent set me up with an HO3 with replacement cost and set the limits at what I purchased the house for and not the cost to rebuild. After a year of going back and forth I finally got him to raise my limits to the proper amount. For some reason he thought he knew best, even though I ran the house through 3 different valuation systems used by insurance companies that I had access to and showed him I was 40K under insured. He still argued for 5 more months after showing him the numbers. I was setting him up for a possible E&O claim if I had a total loss and was under insured.
Posted: Fri May 29, 2009 12:52 pm Post Subject:
My old agent set me up with an HO3 with replacement cost and set the limits at what I purchased the house for and not the cost to rebuild.
Agents usually get paid commision on the amount of premium collected or at least get judged on it. So the higher the premium charged, the more money they make. It makes no sense that an agent would resist a higher policy limit and also, an agent cannot force a person to take a certain limit on their policy. That just makes no sense.It's almost always the other way around... it's _ extremely _ difficult to get a carrier to allow a person to obtain a lower policy limit on a home owners policy. It's extremely unlikely that a person is going to suffer a total loss to their home. So charging a premium for the amount to replace the entire home just means more money in their pocket. Also, they usually figure in the value of the land. Well... how is a person going to suffer a loss to their land (for some reason my city property assessor says that my land is worth about 3x as much as my house). Lastly, most carriers automatically increase a person's HO policy limits each year. This is without the insured's consent. My prior carrier did that and trust me... they made it very difficult to lower the limit back down.
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