Homeowner's Insurance Question

[Sheryl]

I've had an Allstate Deluxe policy for years, which covers full replacement cost for all or partial loss. The face value is more than twice the market value of our home. I assumed that, if we suffered a total loss, we'd be reimbursed the face value of the policy and NOT the market value; today the company told me differently. If we were to rebuild on the same site, we'd get policy face value. If we chose to build or buy elsewhere, we'd just receive the market value. Can this be right? Thanks .... --Sheryl

 

[tompalm]

I have asked this question several times to different Insurance Agents and got the same answer from USAA and State Farm. They stated that I would not get a check to rebuild the house. I have a general contractor's license and would like to do that if needed, but no way would that happen according to the reps that I talked with.

I was told that they would hire a contractor and repair or rebuild the house back to the condition it was in prior to damage. When I bought a house in Vegas a year ago, I had to buy $360,000 of insurance on a house that cost half that much. I called around to different companies and some stated the rebuilding cost was closer to $300,000, but I still had to buy more insurance than I wanted. If the house burns down, I would love to take that check for $360,000 and walk away and donate the lot to anyone that would take it. But, that is not going to happen.

To answer your question, Insurance companies are not stupid and there probably comes a point that they will make a deal and hand you a check for less money than rebuilding your house. But whatever they tell you now, is not in writing and the rules will change when you file your claim.

There are a lot of people on this forum that probably have more experience with this than I do. I look forward to seeing what others say.

 

[Sheryl]

Interesting, Tompalm... Why would the company care what you did with the proceeds? Seems the claim would be clear-cut for, say in my case, $202,000 deluxe replacement cost, or $80,000 if I just opted for a market-value policy. Do you get the feeling they're trying to be a tad too controlling over our post-trauma lives?

 

[tompalm]

Interesting, Tompalm... Why would the company care what you did with the proceeds? Seems the claim would be clear-cut for, say in my case, $202,000 deluxe replacement cost, or $80,000 if I just opted for a market-value policy. Do you get the feeling they're trying to be a tad too controlling over our post-trauma lives?

You always hear about people having to fight with their insurance company and I think it is because the insurance company doesn't want to pay any more than they have too. So, if you will take a check for less money than rebuilding, maybe they will give that to you.

However, in my case, the house is in a Home Owner's Association and the Association will go after myself or the insurance company if a pile of trash is left there too long. Like if I took the cash and ran away and living in a different state, so it would be easier to go after the insurance company and make them rebuild. I think they are liable, so they need to rebuild in a HOA. The HOA expects that house to be rebuilt to the original condition and I read that in the documents.

 

[MuranoJo]

Market value and replacement value are not necessarily the same. Market values for many homes can now be significantly lower than what it would cost to rebuild your home from the ground up.

If you have a full replacement policy, contractually they are responsible for replacing your home, whatever the cost, up to the face value of your policy.
Depending on the construction costs in your area, you may be over-insured, or not. It's always a good idea to work this out with your agent from time to time, as some insurance companies use an average standard value per square foot which is not too sophisticated and could be outdated.

As to if they'd let you take a check and run (and do your own thing, even in a different location), it should be there in the contract. Kinda like a timeshare contract--read the details. And call your agent if it's not clear, which is probably different than a timeshare agreement.

I don't claim to be an insurance professional: I used to work in insurance and at one time was a licensed insurance agent, but that was many moons ago.