Homeowners' Insurance -- Is this Illegal? WWYD?

[Purple Cat]

I bought my first home a year ago. Travelers told me that I needed $198,000 of coverage. I found out yesterday that they sent an agent out a month later who calculated the value at $134,000. They never told me.

 

A year later, Travelers raised the premium, telling me it would now cost $200,000 to replace my home. At that time, the agent tells me that because they calculated the replacement value at $134,000, they would never pay more than that -- even though I had been told by them that I needed $198,000 to replace it and had paid for that coverage.

 

$134,000 is appreciably less than what I paid, and far, far less than the property value for tax purposes.

 

The premium for the maximum amount they would pay (the $134,000) is 2/3 of what I have paid the last year.

 

Is that illegal? WWYD? Reactions?

[Sebastian (a lady)]

I bought my first home a year ago. Travelers told me that I needed $198,000 of coverage. I found out yesterday that they sent an agent out a month later who calculated the value at $134,000. They never told me.

 

A year later, Travelers raised the premium, telling me it would now cost $200,000 to replace my home. At that time, the agent tells me that because they calculated the replacement value at $134,000, they would never pay more than that -- even though I had been told by them that I needed $198,000 to replace it and had paid for that coverage.

 

$134,000 is appreciably less than what I paid, and far, far less than the property value for tax purposes.

 

The premium for the maximum amount they would pay (the $134,000) is 2/3 of what I have paid the last year.

 

Is that illegal? WWYD? Reactions?

 

Do you have the documentation that went with your policies? I would start by going through that and see what it says you were paying for.

[Dobela]

Value and replacement costs are 2 different things. Value is how much it would appraise for. Insurance companies usually do rate charges according to replacement costs. While the house is valued and would sell at one price, it would most loikely cost more to rebuild it as the cost of building materials still skyrocket.

 

I would call your agent again and ask for reasons. I would also consider calling other companies and asking for a quote. It would involve an inspection by the agent most likely but you could receive better insurance for the price.

 

If you continue to have problems, most states have an Department of Insurance (or an Insurance Commissioner) at the state level that will investigate any problems the customer is having with a company or particular agent. They are pretty powerful in our state so I wouldn't hesitate calling them.

[Mama Geek]

In FL we would have to have our house covered by insurance for 2 1/2-3 times what we paid for it and then we would still have a $10000 deductible. At this time our house is still uninsured and unless something better comes along we won't get insurance. We paid cash for our house. We don't live on the coast and probably half of the value of our place is in the land. It is 1/2 an acre on a nice lake.

 

I agree with looking through your paperwork and then if it still sounds really fishy check into other insurance companies.

[Teachin'Mine]

Keep in mind that your insurance amount is for the house itself only. The value of the land doesn't play into it since that would still be there even if there's a total loss. But I agree that re-building costs are very high, so I'd check locally for what the actual cost to re-build would be and then if it's different from what your insurance company says, submit the paperwork to them and get the coverage adjusted, or look elsewhere.

[In The Great White North]

There is also the consideration of rebuilding an "equivalent" house (ie. same basic size and shape) or rebuilding the "exact" house (ie. with period trim, etc) I forget the specific terms for it but the replacement cost is way different for the two and your insurance should say on it.

[Mama Geek]

It was my understanding that labor for building a new house right now is pretty cheap because workers are hungry. I don't know about the cost of materials and how they have changed recently, but I don't necessarily believe that it is really expensive to build right now.

[chepyl]

There is replacement cost for your house, and then also for your belongings. If the amount difference covering what is inside your house?

[In The Great White North]

At that time, the agent tells me that because they calculated the replacement value at $134,000, they would never pay more than that -

 

The "never" is certainly incorrect - they will reassess it frequently, change your premiums, and change what they will pay out.

[Brigitte]

Usually your contents replacement is about 50% of the replacement value of the house. It sounds like that is where the $198000 came from, based on a home value of $134,000. While labor for building is relatively cheap, materials have become extremely expensive. It sounds like you and your agent are talking past each other about two separate numbers.

[Night Elf]

My DH said some of the same things as other posters:

 

1. The higher price could incude the contents of the home.

2. Call other insurance companies immediately and get quotes.

3. Call the insurance commissioner if you feel you've been ripped off.

 

If another company gives you a better rate, you can either go with that or let Travelers know you've found a better rate and they may try to match it.

 

But this raises good questions. DH doesn't know whether or not our insurance company would pay out the amount we are covered if our home is valued at less. It certainly doesn't seem fair that we pay the premium for say $200K of insurance and then have them tell us they would only give us $134K, especially when the premium rate for $134K would be lower. But house values fluxuate so I don't know what that means for insurance. I think I'll look into that. Our house value has gone down but our insurance has stayed the same. It never occurred to us to think about changing the premiums. I guess we are thinking the house values will rise again. Oh please, let them go up again!

[Purple Cat]

The $134,000 is strictly the replacement value of the house, and the $200,000 Traveler's told me the house should be insured for is strictly for the home (not personal property, etc.)

 

I called my mortgage holder today, and they are requiring me to get homeowner's insurance from a different company. Their interest is not protected because the principal balance exceeds the maximum amount that Traveler's will pay -- the $134,000 replacement value.

 

Thank you!