Pennsylvania Bans Lenders from Requiring Excess Home Insurance
East News • July 8, 2008
Pennsylvania homeowners may be entitled to a reduction in their homeowners' insurance premiums, thanks to The Mortgage Property Insurance Coverage Act that Gov. Rendell signed into law on July ...
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Subject: Pennsylvania Bans Lenders from Requiring Excess Home Insuran
Posted On: July 8, 2008, 1:42 pm CDT
Posted By: Temblor
Comment:
As is so often the case in articles such as this, the "value" under discussion is never really defined, although here it is alluded to in a circular way.
This is important because I often find insurance agents who mis-understand what value we are talking about with homeowners policies and most property policies in general.
While there are other possible ways to value and insure property, depending on special circumstances, 99% of the time the proper valuation is "Replacement Cost", defined as the cost to rebuild or replace the property "as it stands", i.e. without including any improvements that made be required by new building codes, etc.
In most coastal states, cost to upgrade to current code is usually added to all policies automatically, in other states agents should be aware of the need for this coverage for older homes, i.e., they have to be aware of the provisions of their building codes.
Imagine an insured who insures only for the cost to rebuild their home as it stands, then finds out there is another $50,000 required to bring the house up to current code. This wouldn't be covered unless "law and ordinance" coverage were added.
Far to many agents, instead of insuring to replacement cost, insure instead to market value which has no bearing whatsoever in property insurance (except perhaps rare exceptional cases). Market value is virtually always what the homeowner thinks of, and it is the agents job to make sure they properly understand.
Subject: Pennsylvania Bans Lenders from Requiring Excess Home Insuran
This is important because I often find insurance agents who mis-understand what value we are talking about with homeowners policies and most property policies in general.
While there are other possible ways to value and insure property, depending on special circumstances, 99% of the time the proper valuation is "Replacement Cost", defined as the cost to rebuild or replace the property "as it stands", i.e. without including any improvements that made be required by new building codes, etc.
In most coastal states, cost to upgrade to current code is usually added to all policies automatically, in other states agents should be aware of the need for this coverage for older homes, i.e., they have to be aware of the provisions of their building codes.
Imagine an insured who insures only for the cost to rebuild their home as it stands, then finds out there is another $50,000 required to bring the house up to current code. This wouldn't be covered unless "law and ordinance" coverage were added.
Far to many agents, instead of insuring to replacement cost, insure instead to market value which has no bearing whatsoever in property insurance (except perhaps rare exceptional cases). Market value is virtually always what the homeowner thinks of, and it is the agents job to make sure they properly understand.