I've been watching real estate around me with absolute astonishment. After
being evicted from our apartment last December because the landlord sold the
house, we bought a home for $51k and insured it for $75. We did alot of work
on it to make it nice. But regardless of that, real estate prices have gone
crazy and we couldn't replace our home with less than $100-125k now, less
than a year later.

The other night I had a nightmare that my house burnt down and, even after
hopefully convincing the insurance company we deserve $75k, we had $75k and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim (the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

talk to your agent it should not be a problem insuring it for the correct
cost also many policies cover replacement cost up to 125% of value to cover
for inflation if you have to get an appraisal done then do it!


if not change companies.

Wayne


"Chia Pet" Chia wrote in message
...
I've been watching real estate around me with absolute astonishment. After
being evicted from our apartment last December because the landlord sold
the
house, we bought a home for $51k and insured it for $75. We did alot of
work
on it to make it nice. But regardless of that, real estate prices have
gone
crazy and we couldn't replace our home with less than $100-125k now, less
than a year later.

The other night I had a nightmare that my house burnt down and, even after
hopefully convincing the insurance company we deserve $75k, we had $75k
and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant
and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim
(the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

"Chia Pet" Chia wrote in message
...
I've been watching real estate around me with absolute astonishment. After
being evicted from our apartment last December because the landlord sold
the
house, we bought a home for $51k and insured it for $75. We did alot of
work
on it to make it nice. But regardless of that, real estate prices have
gone
crazy and we couldn't replace our home with less than $100-125k now, less
than a year later.

The other night I had a nightmare that my house burnt down and, even after
hopefully convincing the insurance company we deserve $75k, we had $75k
and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant
and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim
(the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

Yeah- Make sure your policy has enough coverage to replace your house in the
event it burns down or is otherwise totally destroyed by an insured event.
Keep in mind that part of the value of your house is in the land, which
typically doesn't burn down with the house.
How much of your home's value is the land? The difference between the land
value and the total value is the value of the structure. Make sure you have
replacement cost on at least that much, and you should have no problems in
the unlikely event your house is totalled in a fire. Make sure the coverage
on your policy is indexed for inflation, too.
Dave

On 10-Nov-2003, "wayne" wrote:

talk to your agent it should not be a problem insuring it for the correct
cost also many policies cover replacement cost up to 125% of value to
cover
for inflation if you have to get an appraisal done then do it!


if not change companies.

Wayne


"Chia Pet" Chia wrote in message
...
I've been watching real estate around me with absolute astonishment.
After
being evicted from our apartment last December because the landlord sold
the
house, we bought a home for $51k and insured it for $75. We did alot of
work
on it to make it nice. But regardless of that, real estate prices have
gone
crazy and we couldn't replace our home with less than $100-125k now,
less
than a year later.

The other night I had a nightmare that my house burnt down and, even
after
hopefully convincing the insurance company we deserve $75k, we had $75k
and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant
and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim
(the
purchase price was abnormally low even then). But replacement even with
a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare?

I agree 100%. Most companies will insure for replacement value, plus a
certain percentage to cover contents. If you need more content insurance,
then you have to get extra riders on your policy to cover it. If your
insurance doesn't cover replacement value, then you need to talk to your
insurance agent to change it. If they won't change it, then it's time to
look for a new insurance company...

Chia Pet wrote:

I've been watching real estate around me with absolute astonishment. After
being evicted from our apartment last December because the landlord sold the
house, we bought a home for $51k and insured it for $75. We did alot of work
on it to make it nice. But regardless of that, real estate prices have gone
crazy and we couldn't replace our home with less than $100-125k now, less
than a year later.

The other night I had a nightmare that my house burnt down and, even after
hopefully convincing the insurance company we deserve $75k, we had $75k and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim (the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???
Yes, insure it for full value, that way you covered if the dream comes
true.....

"Daniel L. Belton" wrote in message
...

On 10-Nov-2003, "wayne" wrote:

talk to your agent it should not be a problem insuring it for the
correct
cost also many policies cover replacement cost up to 125% of value to
cover
for inflation if you have to get an appraisal done then do it!


if not change companies.

Wayne


"Chia Pet" Chia wrote in message
...
I've been watching real estate around me with absolute astonishment.
After
being evicted from our apartment last December because the landlord
sold
the
house, we bought a home for $51k and insured it for $75. We did alot
of
work
on it to make it nice. But regardless of that, real estate prices have
gone
crazy and we couldn't replace our home with less than $100-125k now,
less
than a year later.

The other night I had a nightmare that my house burnt down and, even
after
hopefully convincing the insurance company we deserve $75k, we had
$75k
and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire
hydrant
and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher
claim
(the
purchase price was abnormally low even then). But replacement even
with
a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare?

I agree 100%. Most companies will insure for replacement value, plus a
certain percentage to cover contents. If you need more content insurance,
then you have to get extra riders on your policy to cover it. If your
insurance doesn't cover replacement value, then you need to talk to your
insurance agent to change it. If they won't change it, then it's time to
look for a new insurance company...

Ok, the thing that worries me is this. I insure for replacement value. The
insurance company says " replacement value is the cost to buy a similar
property - market value - the price you paid, perhaps with an inflation
adjustment. Certainly not the price of those other more expensive properties
which, based on what you paid, your property surely isn't."

You can buy $1 million insurance on a $100k property. If it burns, you just
get $100k.

So how to assure convergence between reality and insurance adjustors?

wrote in message
...
Insurance people are all crooks !!!!
Insurance people are the scum of the earth, and are even worse
than most lawyers and politicians. Insurance companies are all filthy
rich, from ripping off their customers. Not a one of them has ever
worked a day in their lives. They just sit on their fat asses and
collect your money.

Remember that the next time you pay for insurance.
After all, you are paying that crook to sit at a desk, talk on the
phone, and play with pens and pencils, while the rest of us have
REAL jobs. And they have the nerve to call selling insurance
a job !!! YEAH RIGHT !!!!


Exactly my fear. I can pay for more, but how can I actually get what I need.
That is my nightmare!

"jim" wrote in message ...
Chia Pet wrote:

I've been watching real estate around me with absolute astonishment.
After
being evicted from our apartment last December because the landlord sold
the
house, we bought a home for $51k and insured it for $75. We did alot of
work
on it to make it nice. But regardless of that, real estate prices have
gone
crazy and we couldn't replace our home with less than $100-125k now,
less
than a year later.

The other night I had a nightmare that my house burnt down and, even
after
hopefully convincing the insurance company we deserve $75k, we had $75k
and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant
and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim
(the
purchase price was abnormally low even then). But replacement even with
a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???
Yes, insure it for full value, that way you covered if the dream comes
true.....

But the issue is precicely full value. How to prove it without selling my
home?

Consider the prior owner had the tax assessment so high that after I bought
it the taxes were cut in half even though the average property value (and
tax) went up 15% in the city after reassessment.

Actual price cut my taxes from the fictitious assessment of the city. Actual
trumps some fictional assessment.

So, I have this huge adjustment in my taxes whuich is money from heaven,
based on actual selling price. But, then, what about insurance??? There is
my nightmare. Actual is very potent.

Chia Pet wrote:
I've been watching real estate around me with absolute astonishment. After
being evicted from our apartment last December because the landlord sold the
house, we bought a home for $51k and insured it for $75. We did alot of work
on it to make it nice. But regardless of that, real estate prices have gone
crazy and we couldn't replace our home with less than $100-125k now, less
than a year later.

Gosh, what a nightmare it is to have your house double in value while
you just sit there! The horror, the horror.

Deal with your "nightmare" by considering a reappraisal and mortgage
re-fi. (It may be a mite too soon to realize value, but start
discussions with your banker anyway.) You'll soon find that the bank is
delighted to consider you own a goodly greater portion of the home,
because they're only holding the bag for, what, $40K or so of a $100K
home. You now can get a lower rate and home equity financing.

Such a nightmare! Glad I'm not you.

The other night I had a nightmare that my house burnt down and, even after
hopefully convincing the insurance company we deserve $75k, we had $75k and
were hopelessly unable to buy a home.

That call to your banker might prove enlightening. The mortgage escrow
may have built-in insurance, to cover the bank's investment. Between the
bank and you you may be technically overinsured. Just find out, this
shouldn't be a blank field in your mind.

A downside is that the mortgage may require you to have adequate
insurance, depending, and if it's inadequate they'll require you to up
it. Just find out.

The good news is I woke up and the house is fine and near a fire hydrant and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim (the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

Sell now, and buy a brick house with the proceeds.

"Dan Hartung" wrote in message
...
Chia Pet wrote:
I've been watching real estate around me with absolute astonishment.
After
being evicted from our apartment last December because the landlord sold
the
house, we bought a home for $51k and insured it for $75. We did alot of
work
on it to make it nice. But regardless of that, real estate prices have
gone
crazy and we couldn't replace our home with less than $100-125k now,
less
than a year later.

Gosh, what a nightmare it is to have your house double in value while
you just sit there! The horror, the horror.

Deal with your "nightmare" by considering a reappraisal and mortgage
re-fi. (It may be a mite too soon to realize value, but start
discussions with your banker anyway.) You'll soon find that the bank is
delighted to consider you own a goodly greater portion of the home,
because they're only holding the bag for, what, $40K or so of a $100K
home. You now can get a lower rate and home equity financing.

Such a nightmare! Glad I'm not you.

The other night I had a nightmare that my house burnt down and, even
after
hopefully convincing the insurance company we deserve $75k, we had $75k
and
were hopelessly unable to buy a home.

That call to your banker might prove enlightening. The mortgage escrow
may have built-in insurance, to cover the bank's investment. Between the
bank and you you may be technically overinsured. Just find out, this
shouldn't be a blank field in your mind.

A downside is that the mortgage may require you to have adequate
insurance, depending, and if it's inadequate they'll require you to up
it. Just find out.

The good news is I woke up and the house is fine and near a fire hydrant
and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim
(the
purchase price was abnormally low even then). But replacement even with
a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

Sell now, and buy a brick house with the proceeds.

But, but......

Yeah, luck, except I don't see it as an investment. I bought my house to
live in. Hell, my brother 5 months ago shunned my neighborhood because he'd
"never get his money back." (LOL!). I live in "Tech Valley", but I love
living here. I always wanted to live here. I moved here to stay, not to sell
and move. It's my home. So, like Silicon Valley, it goes nuts. Yeah, poor me
since I just want to live here and have a safe home value insured and I want
my taxes to stay reasonable. I don't want to sell and move next door to you!
No, really, I just want to live here. That's why I'm afraid.

You don't have to replace the real estate; so that part of the cost
doesn't need additional insurance.

If your house itself actually has risen in replacement cost, insurance
companies are happy to insure it for more; the more they insure, the
happier they are.

They just don't want to insure it for more than it's worth, because
it encounters a moral hazard, namely people making money by setting
fire to their house; which raises the odds against them enough for them
to notice on the bottom line. They want to be sure you can sell it
for more than you're insuring it for, so you sell rather than burning.
--
Ron Hardin


On the internet, nobody knows you're a jerk.

Chia Pet wrote:

I've been watching real estate around me with absolute astonishment. After
being evicted from our apartment last December because the landlord sold the
house, we bought a home for $51k and insured it for $75. We did alot of work
on it to make it nice. But regardless of that, real estate prices have gone
crazy and we couldn't replace our home with less than $100-125k now, less
than a year later.

The other night I had a nightmare that my house burnt down and, even after
hopefully convincing the insurance company we deserve $75k, we had $75k and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim (the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

Sure, just get a replacement policy. It's the insurance
company's problem of figuring out what the value is and
setting the price of insurance. If the house burns down,
they still have to replace it even if they valued the
replacement cost too low.

But, you bought a house and a year later it is worth twice
what you paid for it and you are whining? I'd be dancing
if I could do that. It took at least 10 years for my house
to double in value.

Chia Pet wrote:

I've been watching real estate around me with absolute astonishment. After
being evicted from our apartment last December because the landlord sold the
house, we bought a home for $51k and insured it for $75. We did alot of work
on it to make it nice. But regardless of that, real estate prices have gone
crazy and we couldn't replace our home with less than $100-125k now, less
than a year later.

The other night I had a nightmare that my house burnt down and, even after
hopefully convincing the insurance company we deserve $75k, we had $75k and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim (the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

Yes, pay for an appraisal, which includes a price for rebuilding. Send
this to the insurance company and have them increase the insured value
of the house.

"Chia Pet" Chia wrote in message
...

"Dan Hartung" wrote in message
...
Chia Pet wrote:
I've been watching real estate around me with absolute astonishment.
After
being evicted from our apartment last December because the landlord
sold
the
house, we bought a home for $51k and insured it for $75. We did alot
of
work
on it to make it nice. But regardless of that, real estate prices have
gone
crazy and we couldn't replace our home with less than $100-125k now,
less
than a year later.

Gosh, what a nightmare it is to have your house double in value while
you just sit there! The horror, the horror.

Deal with your "nightmare" by considering a reappraisal and mortgage
re-fi. (It may be a mite too soon to realize value, but start
discussions with your banker anyway.) You'll soon find that the bank is
delighted to consider you own a goodly greater portion of the home,
because they're only holding the bag for, what, $40K or so of a $100K
home. You now can get a lower rate and home equity financing.

Such a nightmare! Glad I'm not you.

The other night I had a nightmare that my house burnt down and, even
after
hopefully convincing the insurance company we deserve $75k, we had
$75k
and
were hopelessly unable to buy a home.

That call to your banker might prove enlightening. The mortgage escrow
may have built-in insurance, to cover the bank's investment. Between the
bank and you you may be technically overinsured. Just find out, this
shouldn't be a blank field in your mind.

A downside is that the mortgage may require you to have adequate
insurance, depending, and if it's inadequate they'll require you to up
it. Just find out.

The good news is I woke up and the house is fine and near a fire
hydrant
and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher
claim
(the
purchase price was abnormally low even then). But replacement even
with
a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

Sell now, and buy a brick house with the proceeds.

But, but......

Yeah, luck, except I don't see it as an investment. I bought my house to
live in. Hell, my brother 5 months ago shunned my neighborhood because
he'd
"never get his money back." (LOL!). I live in "Tech Valley", but I love
living here. I always wanted to live here. I moved here to stay, not to
sell
and move. It's my home. So, like Silicon Valley, it goes nuts. Yeah, poor
me
since I just want to live here and have a safe home value insured and I
want
my taxes to stay reasonable. I don't want to sell and move next door to
you!
No, really, I just want to live here. That's why I'm afraid.

Maybe a doctor could help!

Shepherd

On Tue, 11 Nov 2003 03:42:45 GMT, "Chia Pet" Chia
wrote:

I've been watching real estate around me with absolute astonishment. After
being evicted from our apartment last December because the landlord sold the
house, we bought a home for $51k and insured it for $75. We did alot of work
on it to make it nice. But regardless of that, real estate prices have gone
crazy and we couldn't replace our home with less than $100-125k now, less
than a year later.

The other night I had a nightmare that my house burnt down and, even after
hopefully convincing the insurance company we deserve $75k, we had $75k and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim (the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???



Have your local fire department inspect your house. They will do
this for free and provide good suggestions. Installing a sprinkler
system is better than having fire insurance, plus it could save your
life. Test your smoke detectors (and replace them if they are old)
and have a fire extinguisher in the garage, kitchen, and basement.

"Chia Pet" Chia
wrote:

The good news is I woke up and the house is fine and near a fire hydrant
and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim
(the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

Have you talked to your insurance agent? There is a "full replacement"
coverage that may be suited to your needs.

We have had the opposite experience, we bought our home for $66k four years
ago and did some repairs/improvements (small stuff) and each year our
insurance
coverage/appraisal has gone up,were insured for "replacement" value which
now
is up over $130k plus an additional $18k for an "outbuilding" we have yet to
locate!
Between the house, loss of use and contents, if we had a fire we would be
looking
at a check for over $275k!

I would talk to your insurance agent asap..

"Edwin Pawlowski" wrote in message
...
"Chia Pet" Chia
wrote:

The good news is I woke up and the house is fine and near a fire
hydrant
and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim
(the
purchase price was abnormally low even then). But replacement even with
a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

Have you talked to your insurance agent? There is a "full replacement"
coverage that may be suited to your needs.

On Tue, 11 Nov 2003 05:12:41 GMT, "DaveG" wrote:


Yeah- Make sure your policy has enough coverage to replace your house in the
event it burns down or is otherwise totally destroyed by an insured event.
Keep in mind that part of the value of your house is in the land, which
typically doesn't burn down with the house.
How much of your home's value is the land? The difference between the land
value and the total value is the value of the structure. Make sure you have
replacement cost on at least that much, and you should have no problems in
the unlikely event your house is totalled in a fire. Make sure the coverage
on your policy is indexed for inflation, too.


What is the average worth of a house lot as a percentage of the whole
property including the house? Since money is very tight its one of
those hard choices I will have to make. My 1200 sq ft house is on
8000 sq ft lot in a modest neighborhoods and I think the property si
worth $140K. The thinking is that the money not spent in insurance
can pay for rebuilding on the same lot. I am in a very low fire risk
neighborhoods and being the only house in a corner lot with a single
neighbors some distance away, I have even lower risk.

What is the average worth of a house lot as a percentage of the whole
property including the house? Since money is very tight its one of
those hard choices I will have to make. My 1200 sq ft house is on
8000 sq ft lot in a modest neighborhoods and I think the property si
worth $140K. The thinking is that the money not spent in insurance
can pay for rebuilding on the same lot. I am in a very low fire risk
neighborhoods and being the only house in a corner lot with a single
neighbors some distance away, I have even lower risk.



Your insurance agent should be able to be of some help. They should be
familiar with building costs in your area, and such, and can help you
determine the correct coverage. You can review your existing coverage with
any competent agent anytime, to be sure your coverage level is adequate. In
my area, for new construction, there is about a 4 to 1 ratio on land value
to house.
In other words, if a lot is selling for $100K, the target price is to build
a house in there for a total cost of about $400K. Those are very
approximate. If you are really worried, have an appraisal done to see what
the current cost of completely rebuilding a similar structure on the same
lot would run, and see if your policy would cover that.
Dave

"Ron Hardin" wrote in message
...
You don't have to replace the real estate; so that part of the cost
doesn't need additional insurance.

If your house itself actually has risen in replacement cost, insurance
companies are happy to insure it for more; the more they insure, the
happier they are.

They just don't want to insure it for more than it's worth, because
it encounters a moral hazard, namely people making money by setting
fire to their house; which raises the odds against them enough for them
to notice on the bottom line. They want to be sure you can sell it
for more than you're insuring it for, so you sell rather than burning.

Which is why the replacement cost insurance is puzzling. It would be one
thing if they just rebuilt. But if people can take the cash and run, then
that's the problem of arson for profit arising.



--
Ron Hardin


On the internet, nobody knows you're a jerk.

wrote in message
news
On Tue, 11 Nov 2003 06:24:35 GMT, "Chia Pet" Chia
wrote:

Ok, the thing that worries me is this. I insure for replacement value.
The
insurance company says " replacement value is the cost to buy a similar
property - market value - the price you paid, perhaps with an inflation
adjustment. Certainly not the price of those other more expensive
properties
which, based on what you paid, your property surely isn't."

You can buy $1 million insurance on a $100k property. If it burns, you
just
get $100k.

Actually, you can't.


So how to assure convergence between reality and insurance adjustors?


Everything you said above is incorrect. You can insure the house for
replacement
cost. That means if it burns down, they build you a similar house on the
same
piece of dirt. Not replacement "value" to buy a different house on a
different
piece of dirt - THE COST TO REPLACE BY REBUILDING. Home insurance is not
the
same as car insurance. You need to do a little homework. My insurance not
only
covers the actual replacement cost, but additionally provides the same
amount
for "loss of use" protection. That pays my rent and other expenses during
the
time my house is unavailable to live in.

BB

Ok, thanks. I'll look into it.

Ron Hardin wrote:

You don't have to replace the real estate; so that part of the cost
doesn't need additional insurance.

If your house itself actually has risen in replacement cost, insurance
companies are happy to insure it for more; the more they insure, the
happier they are.

They just don't want to insure it for more than it's worth, because
it encounters a moral hazard, namely people making money by setting
fire to their house; which raises the odds against them enough for them
to notice on the bottom line. They want to be sure you can sell it
for more than you're insuring it for, so you sell rather than burning.
--
Ron Hardin


On the internet, nobody knows you're a jerk.

That argument is a non-starter. First they won't give you
more money that it will cost to replace the house, no matter
what you insured it for. Second, they would be very happy
if you burned it down yourself and you will most likely be
caught and they won't have to pay anything. Third, burning
for profit is rather risky and likely to lead you right to
the pen.

Finally, although insuring a house or building for more than
it is worth won't end up with a profit if it burns, you can
insure a persons life for any amount you want, but you don't
see people dying by the droves as others kill them off to
get the life insurance. Maybe it's because it is MURDER.
And, the insurance company doesn't give a damn about moral
hazards, they just care about profits so that's why they
don't pay anything that results from illegal activities of
policy holders.

In article ,
"Chia Pet" Chia says...
, we bought a home for $51k and insured it for $75. . The
purchase price is the insurance company's weapon against a higher claim (the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

Yes. Find a different insurance carrier.
--
Mark

The truth as I perceive it to be.
Your perception may be different.

Triple Z is spam control.

Ok, the thing that worries me is this. I insure for replacement value. The
insurance company says " replacement value is the cost to buy a similar
property - market value - the price you paid, perhaps with an inflation
adjustment. Certainly not the price of those other more expensive properties
which, based on what you paid, your property surely isn't."

You can buy $1 million insurance on a $100k property. If it burns, you just
get $100k.

So how to assure convergence between reality and insurance adjustors?

You worry too much. First, replacement cost isn't the price you paid.
It's the price of replacing the house. Your land simply won't burn,
no matter how far you are from a hydrant.

Second, replacement cost is a formula based on square footage and
construction costs. You can easily find the average cost per square
foot for the type of construction you have, and insure for that. If
you're just estimating, try $150 per square foot and see how close you
are to what a new house, less land, would be.

And last, call your agent. They're the only ones who can assess your
specific needs and recommend the appropriate insurance. If you don't
trust them, find another agent.

Oh, and go buy a fire extinguisher.

Jeff

Hello,
Not all insurance agents are crooks. Talk to an agent of your concerns
and he'll come up with proper policy. I think you worry WAY too much.
You can have current market value replacement policy with inflation
rider. Isn't it enough for you? For the contents, you can make itemized
list with video document. We're talking about building and contents,
don't care about land the house sits on. Land never perishes.
I have a house insurance, cabin insurance which is out in the boon dogs,
business insurance. If I were like you, I'd never have a good night of
sleep.
Tony

Jeff Cochran wrote:
Ok, the thing that worries me is this. I insure for replacement value. The
insurance company says " replacement value is the cost to buy a similar
property - market value - the price you paid, perhaps with an inflation
adjustment. Certainly not the price of those other more expensive properties
which, based on what you paid, your property surely isn't."

You can buy $1 million insurance on a $100k property. If it burns, you just
get $100k.

So how to assure convergence between reality and insurance adjustors?


You worry too much. First, replacement cost isn't the price you paid.
It's the price of replacing the house. Your land simply won't burn,
no matter how far you are from a hydrant.

Second, replacement cost is a formula based on square footage and
construction costs. You can easily find the average cost per square
foot for the type of construction you have, and insure for that. If
you're just estimating, try $150 per square foot and see how close you
are to what a new house, less land, would be.

And last, call your agent. They're the only ones who can assess your
specific needs and recommend the appropriate insurance. If you don't
trust them, find another agent.

Oh, and go buy a fire extinguisher.

Jeff

"George E. Cawthon" wrote in message
...


Ron Hardin wrote:

You don't have to replace the real estate; so that part of the cost
doesn't need additional insurance.

If your house itself actually has risen in replacement cost, insurance
companies are happy to insure it for more; the more they insure, the
happier they are.

They just don't want to insure it for more than it's worth, because
it encounters a moral hazard, namely people making money by setting
fire to their house; which raises the odds against them enough for them
to notice on the bottom line. They want to be sure you can sell it
for more than you're insuring it for, so you sell rather than burning.
--
Ron Hardin


On the internet, nobody knows you're a jerk.

That argument is a non-starter. First they won't give you
more money that it will cost to replace the house, no matter
what you insured it for.

But there's a huge rub. Replacing my house, according to the insurance
company, would cost about $350k on a home with a market value of $50-125k
(depending how you count it). That's because of building costs and square
footage.

So, then the problem. They fight the claim. Theoretically, I could rebuild
and then claim the money in court and win if I had a replacement policy (if
there is no weasel clause). But, if I don't have the money to build first (I
don't), then they offer some lowball comparable price for a neighborhood
purchase and threaten to withold everything and initiate an arson
investigation. I tell them I just want my house rebuilt and they yell FRAUD!
Why should I get a brand-new home to replace the old ragged one? I can take
their paltry settlement or hire a lawyer and litigate it for years.

Suddenly, the policy isn't really insurance. It's a contract to get a ton of
crap if I ever need to collect on it. That's the reality of much of the
insurance business.

If I really could get what I bargained for, I'd buy in a second. I'd say
here's the several hundred more, give me the gold plated coverage.

Second, they would be very happy
if you burned it down yourself and you will most likely be
caught and they won't have to pay anything. Third, burning
for profit is rather risky and likely to lead you right to
the pen.

Finally, although insuring a house or building for more than
it is worth won't end up with a profit if it burns, you can
insure a persons life for any amount you want, but you don't
see people dying by the droves as others kill them off to
get the life insurance. Maybe it's because it is MURDER.
And, the insurance company doesn't give a damn about moral
hazards, they just care about profits so that's why they
don't pay anything that results from illegal activities of
policy holders.

And that's why they don't pay without a fight too. And the more ammunition
they have, the less chance the court will find bad faith if they fight, and
the more likely it will be in litigation instead of in the form of a check
at crunch time.

Close your eyes (after reading this, silly) tap your heels together three
times, and say "I want to be back in Kansas, Toto".

And then call the city appraiser, and the insurance agent, in about that
order.

--

Christopher a. Young
Learn more about Jesus
www.lds.org
www.mormons.org


"Chia Pet" Chia wrote in message
...
I've been watching real estate around me with absolute astonishment. After
being evicted from our apartment last December because the landlord sold the
house, we bought a home for $51k and insured it for $75. We did alot of work
on it to make it nice. But regardless of that, real estate prices have gone
crazy and we couldn't replace our home with less than $100-125k now, less
than a year later.

The other night I had a nightmare that my house burnt down and, even after
hopefully convincing the insurance company we deserve $75k, we had $75k and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim (the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

"Stormin Mormonn" wrote in message
...
Close your eyes (after reading this, silly) tap your heels together three
times, and say "I want to be back in Kansas, Toto".

And then call the city appraiser, and the insurance agent, in about that
order.

--

Christopher a. Young
Learn more about Jesus
www.lds.org
www.mormons.org


"Chia Pet" Chia wrote in message
...
I've been watching real estate around me with absolute astonishment. After
being evicted from our apartment last December because the landlord sold
the
house, we bought a home for $51k and insured it for $75. We did alot of
work
on it to make it nice. But regardless of that, real estate prices have
gone
crazy and we couldn't replace our home with less than $100-125k now, less
than a year later.

The other night I had a nightmare that my house burnt down and, even after
hopefully convincing the insurance company we deserve $75k, we had $75k
and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant
and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim
(the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???





Where I work and live(I'm an insurance agent in the midwest), when we write
insurance on homes, a Replacement Cost Estimate is done. I ask about all the
features of the home and based on that with the age and where its located, I
am able to come up with an approximate cost of construction to rebuild the
house today. That's how much insurance I recommend clients place on their
home.

Many times the RCE is less than the mortgage amount, so clients are forced
to insure for the mortgage amount(which is kind of stupid, IMHO).

Ask your agent to do an RCE or have the insurance company send out an
appraiser.

Do remember that RCE does not equal Market Value(what you could sell the
home for). Market Value includes land, RCE does not... For example, my
home's Market Value is around $120,000(we recently refinanced so I know) but
the RCE is around $130,000. Some homes on the lake are going for $750,000 -
but the RCE may only be $350,000.

Hope this helps!

Matty

On Tue, 11 Nov 2003 12:49:05 GMT, wrote:

On Tue, 11 Nov 2003 06:24:35 GMT, "Chia Pet" Chia wrote:

Ok, the thing that worries me is this. I insure for replacement value. The
insurance company says " replacement value is the cost to buy a similar
property - market value - the price you paid, perhaps with an inflation
adjustment. Certainly not the price of those other more expensive properties
which, based on what you paid, your property surely isn't."

You can buy $1 million insurance on a $100k property. If it burns, you just
get $100k.

Actually, you can't.


So how to assure convergence between reality and insurance adjustors?


Everything you said above is incorrect. You can insure the house for replacement
cost. That means if it burns down, they build you a similar house on the same
piece of dirt. Not replacement "value" to buy a different house on a different
piece of dirt - THE COST TO REPLACE BY REBUILDING. Home insurance is not the
same as car insurance. You need to do a little homework. My insurance not only
covers the actual replacement cost, but additionally provides the same amount
for "loss of use" protection. That pays my rent and other expenses during the
time my house is unavailable to live in.

BB

The confusion seems to be replacement VALUE (market value) and
replacement COST (cost to rebuild). Some companies will not just write
a check for the replacement cost. They require that you actually
rebuild.

"andy asberry" wrote in message
...
On Tue, 11 Nov 2003 12:49:05 GMT, wrote:

On Tue, 11 Nov 2003 06:24:35 GMT, "Chia Pet" Chia
wrote:

Ok, the thing that worries me is this. I insure for replacement value.
The
insurance company says " replacement value is the cost to buy a similar
property - market value - the price you paid, perhaps with an inflation
adjustment. Certainly not the price of those other more expensive
properties
which, based on what you paid, your property surely isn't."

You can buy $1 million insurance on a $100k property. If it burns, you
just
get $100k.

Actually, you can't.


So how to assure convergence between reality and insurance adjustors?


Everything you said above is incorrect. You can insure the house for
replacement
cost. That means if it burns down, they build you a similar house on the
same
piece of dirt. Not replacement "value" to buy a different house on a
different
piece of dirt - THE COST TO REPLACE BY REBUILDING. Home insurance is not
the
same as car insurance. You need to do a little homework. My insurance not
only
covers the actual replacement cost, but additionally provides the same
amount
for "loss of use" protection. That pays my rent and other expenses during
the
time my house is unavailable to live in.

BB

The confusion seems to be replacement VALUE (market value) and
replacement COST (cost to rebuild). Some companies will not just write
a check for the replacement cost. They require that you actually
rebuild.


Exactly. If you choose not to rebuild, you will most likely receive Actual
Cash Value: Cost to rebuild house today - depreciation = money you get less
deductible. For example:

House built in 1953 burns down. Owner chooses not to rebuild. Cost of
rebuild is $130,000(which is the amount the home was insured for) - 50 years
of depreciation. Owner may expect roughly a little more than half for the
dwelling. He can also expect to pay to have the home torn down and hauled
away himself, plus paying all the fees, inspections, tests and whatnot to
make sure the property is safe to rebuild on, etc. Items that the insurance
company would have picked up had the owner wanted the home rebuilt - to a
point.

This is just in rough-speaking terms, your insurance policy may vary...

My 2c,

Matty

"Chia Pet" Chia wrote in message .. .
I've been watching real estate around me with absolute astonishment. After
being evicted from our apartment last December because the landlord sold the
house, we bought a home for $51k and insured it for $75. We did alot of work
on it to make it nice. But regardless of that, real estate prices have gone
crazy and we couldn't replace our home with less than $100-125k now, less
than a year later.

The other night I had a nightmare that my house burnt down and, even after
hopefully convincing the insurance company we deserve $75k, we had $75k and
were hopelessly unable to buy a home.

The good news is I woke up and the house is fine and near a fire hydrant and
fire house. The bad news is that really is my insurance situation. The
purchase price is the insurance company's weapon against a higher claim (the
purchase price was abnormally low even then). But replacement even with a
$25k increase would definitely be impossible now.

Is there a way out of this nightmare???

So has the original poster understood what's going on? Seems simple
enough for me.

Unless the contractors in your area are all banding together in some
insane and probably illegal fashion, the cost to replace your *house*
is exactly the same as it was last year... not accounting for minor
inflation costs. Land value and the purchase price are two totally
different things.

The rising real estate prices you have seen have not been because the
cost of houses have gone up, it's because the cost of the land has
gone up. Insuance for a residential dwelling does not take the land
cost into account at all. It's all only for the physical house and
furnishings. The only bad thing about rising prices is going to be
in your taxes. if land prices have gone up then you're going to
start paying more tax.

So the cost to rebuild the house only depends on the cost of materials
and the cost of labour. Your *land* value may have dropped 50% or
risen 400% but it will still cost roughly the same to rebuild your
house on that piece of land. Building costs don't fluctuate like
purchases prices. And the 'Purchase Price' of a home also might be
totally unrelated to value. It all depends on how much people are
willing to pay.

So you are fine. I would find out how your insurance company
determines your house value though. Where i live the insurance
companies get a proper appraisal done on the house and use that to
estimate the rebuild cost. As people have said, they usually allow
rebuilding up to 125% of that to account for inflation. If your
insurance company let you choose an arbitrary value then i would worry
that they have some sort of strange policy.

Kevin

Chia Pet wrote:

"George E. Cawthon" wrote in message
...


Ron Hardin wrote:

You don't have to replace the real estate; so that part of the cost
doesn't need additional insurance.

If your house itself actually has risen in replacement cost, insurance
companies are happy to insure it for more; the more they insure, the
happier they are.

They just don't want to insure it for more than it's worth, because
it encounters a moral hazard, namely people making money by setting
fire to their house; which raises the odds against them enough for them
to notice on the bottom line. They want to be sure you can sell it
for more than you're insuring it for, so you sell rather than burning.
--
Ron Hardin


On the internet, nobody knows you're a jerk.

That argument is a non-starter. First they won't give you
more money that it will cost to replace the house, no matter
what you insured it for.

But there's a huge rub. Replacing my house, according to the insurance
company, would cost about $350k on a home with a market value of $50-125k
(depending how you count it). That's because of building costs and square
footage.

So, then the problem. They fight the claim. Theoretically, I could rebuild
and then claim the money in court and win if I had a replacement policy (if
there is no weasel clause). But, if I don't have the money to build first (I
don't), then they offer some lowball comparable price for a neighborhood
purchase and threaten to withold everything and initiate an arson
investigation. I tell them I just want my house rebuilt and they yell FRAUD!
Why should I get a brand-new home to replace the old ragged one? I can take
their paltry settlement or hire a lawyer and litigate it for years.

Suddenly, the policy isn't really insurance. It's a contract to get a ton of
crap if I ever need to collect on it. That's the reality of much of the
insurance business.

If I really could get what I bargained for, I'd buy in a second. I'd say
here's the several hundred more, give me the gold plated coverage.

Second, they would be very happy
if you burned it down yourself and you will most likely be
caught and they won't have to pay anything. Third, burning
for profit is rather risky and likely to lead you right to
the pen.

Finally, although insuring a house or building for more than
it is worth won't end up with a profit if it burns, you can
insure a persons life for any amount you want, but you don't
see people dying by the droves as others kill them off to
get the life insurance. Maybe it's because it is MURDER.
And, the insurance company doesn't give a damn about moral
hazards, they just care about profits so that's why they
don't pay anything that results from illegal activities of
policy holders.

And that's why they don't pay without a fight too. And the more ammunition
they have, the less chance the court will find bad faith if they fight, and
the more likely it will be in litigation instead of in the form of a check
at crunch time.

I haven't a clue what you are talking about. Replacement is
replacement, There is no way you can buy/sell a home for
$125k and need $350k to replace it. Maybe what you are
trying to replace is an old piece of crap with a modern full
frills house. For instance if you house is a 3 bedroom 1
bath, you sure won't get the money to replace it with a 5
bedroom 3 bath house. Only in a very few highly specialized
cases would the difference in cost and replacement be a
factor of 3, and in those case your house would probably be
condemended as unlivable.

They don't "pay without a fight" unless they have some proof
of illegal action. Otherwise, they are likely to end up
paying 3-4 times as much in fines and other court costs.

The confusion seems to be replacement VALUE (market value) and
replacement COST (cost to rebuild). Some companies will not just write
a check for the replacement cost. They require that you actually
rebuild.


Exactly. If you choose not to rebuild, you will most likely receive Actual
Cash Value: Cost to rebuild house today - depreciation = money you get
less
deductible. For example:

House built in 1953 burns down. Owner chooses not to rebuild. Cost of
rebuild is $130,000(which is the amount the home was insured for) - 50
years
of depreciation. Owner may expect roughly a little more than half for the
dwelling. He can also expect to pay to have the home torn down and hauled
away himself, plus paying all the fees, inspections, tests and whatnot to
make sure the property is safe to rebuild on, etc. Items that the
insurance
company would have picked up had the owner wanted the home rebuilt - to a
point.

This is just in rough-speaking terms, your insurance policy may vary...

My 2c,

Matty

This is totally true. The replacement cost is just that, for replacement.
You can't use it to cash out.
When 2 back to back tornados tore thru here about 6 years ago, about 95% or
more of the houses in the city and surrounding areas were re-roofed, and a
lot had siding damage, etc....
Most of us got say 75% of the estimated cost for the repair, and if that was
what you wanted, you took the money and that was that. Claim done, keep the
money, do whatever. If you wanted to actually fix your house, you used the
75% advance (or whatever the percentage the ins. co. paid, it varied by
company) to get the contractor started. Then you got the final payment upon
completion of the work, and presentation of the final bill the insurance
pays the balance of the claim.

So if you want to replace, they pay the full cost. If you want to take the
money and run, they depreciate.
Dave

On Thu, 13 Nov 2003 00:25:40 GMT, "George E. Cawthon"
wrote:


I haven't a clue what you are talking about. Replacement is
replacement, There is no way you can buy/sell a home for
$125k and need $350k to replace it. Maybe what you are
trying to replace is an old piece of crap with a modern full
frills house. For instance if you house is a 3 bedroom 1
bath, you sure won't get the money to replace it with a 5
bedroom 3 bath house. Only in a very few highly specialized
cases would the difference in cost and replacement be a
factor of 3, and in those case your house would probably be
condemended as unlivable.

Having to build the replacement house to (current) code can mean
adding what seem like features. More insulation is an example
locally. Since they can't build a drafty, under-insulated house like
my current one, I would get a better house, with a higher resale
value, than I have.

I am quite willing to agree that meeting the minimum requirements of
code doesn't really qualify as a "frill", though. And it certainly
wouldn't cost three times as much, particularly when the purchase
price includes the land, which wasn't replaced.

Mary

--
Mary Shafer Retired aerospace research engineer

"Mary Shafer" wrote in message
...
On Thu, 13 Nov 2003 00:25:40 GMT, "George E. Cawthon"
wrote:


I haven't a clue what you are talking about. Replacement is
replacement, There is no way you can buy/sell a home for
$125k and need $350k to replace it. Maybe what you are
trying to replace is an old piece of crap with a modern full
frills house. For instance if you house is a 3 bedroom 1
bath, you sure won't get the money to replace it with a 5
bedroom 3 bath house. Only in a very few highly specialized
cases would the difference in cost and replacement be a
factor of 3, and in those case your house would probably be
condemended as unlivable.

I've had cases where people have purchased homes around our city for
$50-$60,000(mostly because of the neighborhood) and it'd cost upwards of
$200,000 to replace them. Homes from the turn of the century would cost more
to rebuild than a standard home today. Homes then used 2x6's instead of
2x4's, some homes have oak flooring & moldings, on top of having to update
the home to current code standards. Replacement Cost means Replacement Cost.
I've had clients complain about the price of insurance, but when they have a
claim they expect to get their premiums back(figuratively speaking) and then
some. So yes, you can conceivably purchase a home for $125,000 and have the
Replacement Cost equal $350,000.

As far as 'frills', if the home burns down and you had an old 'octopus'
furnace - would you expect the insurance company to find another old furnace
to replace it? Of course not. Granted you will see some 'upgrades' - new
furnace, water heater, etc. but I don't consider these 'frills'.

My 2c,

Matty

"Matty" writes:

$200,000 to replace them. Homes from the turn of the century would cost more
to rebuild than a standard home today. Homes then used 2x6's instead of
2x4's, some homes have oak flooring & moldings, on top of having to update

2x6 construction is required by code for all exterior walls in all new
homes in Minnesota. More insulation can be used.

Brian