by connachers » Mon Aug 30, 2010 04:36 pm
What value should I use for coverage limit on a HO3 policy? Improvements from Tax bill? Realtor Appraisal? Other? I just looked at my insurance renewal and think the coverage limit is too high (assuming it's just the house not house + land) but want to stay within the 80% of value and don't know where to get a better number
Posted: Mon Aug 30, 2010 07:09 pm Post Subject:
Keep in mind that it's going to be _replacement cost_.. not the value of the home (replacement cost less depreciation and in todays market... probably less then that). Your tax bill is the value of the home you are in... not its replacement cost and it's probably _much_ lower then even the value.
Almost every carrier is going to have a system for "helping" you with this.
Also keep in mind that most carriers are going to make you need an act of god to lower the limit. This is where they make their bread and butter. That is, the odds of anyone suffering a total loss of a home are next to none. Also, many of the other limits are based on the value of the home. For example... coverage for "Other Structures" on my policy is 25% of the limit on the home which puts it at $76,000! To cover a driveway, a short sidewalk and a wood fence on one side of my house (I'm guessing no more then $15,000). Yet I'm being charged for $76,000 in coverage. I'm pretty sure Personal Property limits are also tied into the home limit (why?). Mine are $228,000. I'm guessing, even at replacement cost, I probably have $70,000 of personal items.
So you can see the incentive of the insurance company to keep your home limits as high as possible. It keeps all of the other limits very high as well. I'm betting if you call and ask them about lowering the home limit that they are going to feed you nothing but reason's for keeping it high... and perhaps increasing it. I have my home insured for about $50,000 more then I bought it for. Figuring that I can't loose the land and this is worth almost as much as the house in my area. Though, I'm banking on not having a total loss of the home. If I do... I can live with walking away with an extra $50,000.
Posted: Tue Aug 31, 2010 12:47 pm Post Subject:
Almost every carrier is going to have a system for "helping" you with this.
I didn't get this one, even though I got the Act of God thing! Is it gonnabe some kinda common process? Or is it gonna vary as per the company's strength areas?
Posted: Tue Aug 31, 2010 11:27 pm Post Subject:
What tcope is saying is that your HO company will automatically apply an inflationary factor at each policy renewal to increase the value/coverage on your home -- to be sure you don't violate the 80% coinsurance penalty provision.
Perhaps you'd like to start a class action lawsuit against all the HO companies in America for their overvaluation of the homes of their insureds. I'd sign on to that, and tcope probably would, too.
Posted: Wed Sep 01, 2010 02:24 pm Post Subject:
in Georgia, the HO3 policy is the standard home owner policy. We use a software program that calculates the replacement value of the house based on building materials, location, labor rates, etc. Our usual policy breaks down the coverage as follows, I'm sure each state is a little different, but you'll get the idea. You can call the company or simply ask your agent.
example:
Replacement Value of Home (Dwelling Limit): $250000
Personal Property Limit: $187500 (usually 50-75% of Replacement Value)
Other Structures (shed, fence, etc): $25000 (10% of Replacement) can add more if needed
Liability: $300,000 (can choose this amount)
other things can be added, but the HO3 in Georgia is a foundation...and each company will add other coverages as needed. This info can be found on you declarations page you get every year...your policy will outline your specfic coverage in detail.
when in doubt, call your agent...he knows his companies product and the state you are in.
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