call me Subject A
1. I am at $620,000 plus 25% not plus 50% ---
call them Subject B
2. They are at $430,000 plus 50% ---
I had this discussion on another forum. One agent comes on and says in a competitive situation he finds an insurance company that doesn't require a replacement cost estimator and does the same thing as subject (lowers coverage A and adds extended limits.
So I typed to the agent what my personal Travelers homeowners contract states. It is on an HO 04 20 form and I suspect that many other companies are using the same language. Can't say what the Mutual Companies say about it?
Additional Replacement Cost Protection
(Applies only when loss to the dwelling exceeds the Coverage Limit of liability shown in the Decelerations)
To the extent that coverage is provided, we agree to provide an additional amount of insurance in accordance with the following provisions.
a. If you have
(1) Allowed us to adjust the Coverage A limit of liability and the premium in accordance with:
(a) The property evaluations we make; and
(b) Any increases in inflation; and
Could Subject B have placed their prospect into a possible 80/20 calculation as noted in the Loss Settlement Clause?
So the Additional Replacement Cost Protection will only be called upon if the insured "Allowed us to adjust the Coverage A limit of liability and the premium in accordance with: (a) The property evaluations we make; and (b) Any increases in inflation;". To me it is rather clear that the insurance company wants coverage A to be at a certain value which is most assuredly a replacement value.
So the agent on the other forum (would try write a policy with non-replacment values) received several posts, telling him that he was willing under-insuring a client. If he was willingly and knowingly doing it there was a possible E&O issue. He was told that he should go to the insurance contracts he sells in such a manner and see what it says about the extended limits endorsement. His final words to me were -- "."
It's one thing to blatantly "break" rules & it's another to be realistic. Fear mongering geezer
I am confident that the insurance company's expect that coverage A is to be the amount that is expected to pay to replace the dwelling after a total fire. The extended coverage is meant to be a just "in case" -- just in case there was a recent Katrina and plywood prices were through the roof. The pricing reflects it. In the quote from Subject B the dwelling premium for $430,000 is $858; the premium for 50% extended limits ($215,000) is $51. Clearly the insurance premium reflects that the $215,000 extended limits coverage will / should never be called upon except in an emergency.
I'm thinking how it is how Excess Liability is not meant to be the coverage first called upon in a claim and therefore the lower premium reflects it.
The way Subject B has the quote designed is that Extended Limits will always be needed after a catastrophic to meet the needed replacement cost.
I don't want to give the name of the agency but it is an agency name that is known throughout the country. It seems that whenever I see a competing quote from the certain agency the dwelling limits are always low. Not a little lower but my hundred of thousands of dollars. The agency is in many cities and it doesn't matter which city I see the quotes come from, the story is always the same.
Although the insurance companies normally want the MSB replacement form with the MSB math, I also do my own calculations using an on-line building site
http://www.building-cost.net/. Because the on-line link is for new building, you have to remove a few things like digging the foundation. But on the flip side the cost of the new foundation is about equal to the clean-up costs after a catastrophic fire so it is a wash. The on-line calculation comes very close to the MSB --- MSB is usually higher.
In the competing agent's e-mail it says,
"if home has a security system (for burglary and/or fire) an additional discount is available"
Funny how there is an "if" but the quote includes a discount for a security system.
This stuff brings up the hard job of discussing esoteric legal jargon with a client, language that is within the insurance contract. In this situation the client is an extended family member and what I really want to ask him is "do you not trust my professional opinions?" "You are willing to go to someone that in all likelihood won't be sitting in that agency chair next year over my 30 years of experience." You are willing to gamble the house on $350 a year?"