Insured to replacment cost or use extended endorsment

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etimer
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Re: Insured to replacment cost or use extended endorsment

Post by etimer »

Hm? I would bet that there are more using ISO stuff than not. Even Mutual companies have jumped on board.

"JERSEY CITY, N.J., December 4, 2007 — ISO Insurance Technology Solutions (ISO-ITS) today announced that Amerisure Mutual Insurance Company has become the first company to fully integrate ISO Rating Service® into its policy administration system. "

I can't prove that more companies than not use ISO....it is just a belief.

I hate to say it but I agree with the your experience with the captives. Is it because a hungry newbie is more apt to work at a captive than an independent agency? I have a good acquaintance that owns a Nationwide agency and I know for a fact that he would rain he!! fire down on any of his agents that would play the under-insured game. But then there are the other ones and that is all I'll say on that subject. I have a face in mind even as I type.

People that play games cause E&O premiums to be as high as they are in today's world.

agent14 wrote:An ISO form is one thing. But many carriers do not write the ISO form, but instead will write a state specific form, and therefore have their own proprietary ERC wording. So an ERC endorsement wording can vary from state to state. As others have said already, if you don't cut corners on insuring at 100% replacement cost, then you will be able to sleep at night.

Not meaning to slam captive agents out there, but I have seen plenty of captive agents that are intentionally writing a policy for as little coverage A dwelling amount as possible to cheat on rate, and adding the ERC thinking that they are covering their bases. I suppose they are very desperate to write the business. Little do they know, that in reality they have their pants down around their ankles should a large loss happen.
detroitgirl2
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Re: Insured to replacment cost or use extended endorsment

Post by detroitgirl2 »

Here's a thought. I am not a P&C agent but I'm considering.

For a few years (because of the down economy) we had replacement coverage at a value about $100,000 more than it would cost to replace our house. I think our premium was about $75.00 to $100.00 more per month than it should have been. Our agent (State Farm) said she could not adjust the values to reduce the policy cost because they are tied to the formulas. This included the structure and the personal property in the house. Don't you have clients that switch insurance companies because they are trying to get their monthly house payment down and know it does'nt cost $400,000 to replace their $200,000 house? And, that they may have $40,000 worth of personals and not $200,000 worth?

Here's another question:

Now, in the Detroit area and surrounding suburbs, there are hundreds of thousands of homeowners, businesses, and renters not covered by flood insurance and never needed it. We just had a flood that left us declared a "federal disaster area" in three counties. Homeowners got no real coverage from their policies and no 'big' money from FEMA. FEMA did help somewhat.

Is their any money in selling flood insurance? Because a thousands of folks would definately want to add it to their homeowners. I think I can get a P&C license and only sell flood insurance. AM I DREAMING?

THANKS!!! Detroitgirl
etimer
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Re: Insured to replacment cost or use extended endorsment

Post by etimer »

I don't mean to sound difficult but asking this question "
Don't you have clients that switch insurance companies because they are trying to get their monthly house payment down and know it does'nt cost $400,000 to replace their $200,000 house?
" makes me need to ask, do you understand this discussion?

It is almost a bright light that you are confusing market values with replacement value.

Can you get a P&C license. Yes but one of the first things you need is to understand the difference between market value and replacement value.

Begin your journey ---

http://adjustersinternational.com/adjus ... 1&pdfID=53


Came back today (Sunday) to apologize to DetroitGirl . I should have just tried to tell you the difference, ya just hit me at a time when I was at a point of being sooooo tired of hearing people confuse market value and replacement value.
Last edited by etimer on Sun Nov 09, 2014 6:26 am, edited 1 time in total.
agent14
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Re: Insured to replacment cost or use extended endorsment

Post by agent14 »

Detroit, couple of things:
1. The cost to rebuild a house, which is based on the cost of labor and materials, in addition to being up to code, has absolutely nothing in common with what a house is worth, which is market value. It is purely accidental if the market value of a property is close to the replacement cost number. You will find this out if you start selling P & C.
2. Insurance companies that offer replacement cost home policies, will insure the house at what they show the cost to rebuild from scratch. This is a non negotiable number. Yes, this number can vary slightly from company to company, but it should not vary by a large margin.
detroitgirl2
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Re: Insured to replacment cost or use extended endorsment

Post by detroitgirl2 »

Thanks. I do understand the difference between replacement cost and market value. I'm just looking at it from a homeowners viewpoint. In a market where there are many choices to 'get another house' at market value, it may not make much sense to rebuild it. That's where our market was for a good stretch of years. And, there is basically no new construction of houses in our area. I would not rebuild, even though I like my lot and the 30 years of trees/ gardening I've done. I assume that the policy would pay me at $400,000 and I could take the money and move. I am going to read my policy to make sure there is no requirement to rebuild.

Thanks.
agent14
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Re: Insured to replacment cost or use extended endorsment

Post by agent14 »

Detroit, in most states, the insured is not required to rebuild. However, the insurer is held to a higher standard by the courts should the insured decide to rebuild.
d's insurance store
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Re: Insured to replacment cost or use extended endorsment

Post by d's insurance store »

detroitgirl2 wrote:Thanks. I do understand the difference between replacement cost and market value. I'm just looking at it from a homeowners viewpoint. In a market where there are many choices to 'get another house' at market value, it may not make much sense to rebuild it. That's where our market was for a good stretch of years. And, there is basically no new construction of houses in our area. I would not rebuild, even though I like my lot and the 30 years of trees/ gardening I've done. I assume that the policy would pay me at $400,000 and I could take the money and move. I am going to read my policy to make sure there is no requirement to rebuild.

Thanks.
You also want to be aware that most policy language specifies that without rebuilding, the loss settlement is for Actual Cash Value...which means deductions for depreciation. It's a common misconception that in the event of a property loss, the insurance carrier comes out and drops a big bag of money on the front yard and leaves the insured to spend it as they wish. Also, if you still have a loan against the property, any slug of monies that are paid without intent to rebuild gives the lender first right of recovery. In a housing market like Detroit, there are policies that can contain language that just insure for property value rather than rebuilding value given the upsidedown nature of depressed housing markets and higher rebuilding costs.
etimer
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Re: Insured to replacment cost or use extended endorsment

Post by etimer »

You keep going back to what the house is worth. You aren't getting it. When I lived in San Francisco there were districts that became hot pieces of real estate and other districts that became cold. None of it meant that magically the homes become more or less costly to rebuild.

f you read the HO forms, you just mind find that although you aren't required to rebuild there may be a few issues that people won't like.

Now why would an insurance company do such a thing. Perhaps because of moral hazard? I think maybe...just maybe eh?

I once had a million dollar claim that to this day, I would say that I suspected arson. It could never be proven in court. The person with the burned building had the same exact fire circumstance in another State. Maybe bad luck but I doubt it.

Moral hazard is something that the government just doesn't understand and we end up with massive Medicare fraud.

From a feel good standpoint I understand that someone doesn't feel it is fair to pay for replacement insurance on a home that is in a declining market. The upside down affair has more to do with public policy / individual choices, etc. and less to do with replacement cost of a home.

agent14 wrote:Detroit, couple of things:
1. The cost to rebuild a house, which is based on the cost of labor and materials, in addition to being up to code, has absolutely nothing in common with what a house is worth, which is market value. It is purely accidental if the market value of a property is close to the replacement cost number. You will find this out if you start selling P & C.
2. Insurance companies that offer replacement cost home policies, will insure the house at what they show the cost to rebuild from scratch. This is a non negotiable number. Yes, this number can vary slightly from company to company, but it should not vary by a large margin.
FurriePrincess
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Re: Insured to replacment cost or use extended endorsment

Post by FurriePrincess »

Another side of the coin with this discussion, the insurance companies who are using RCE software that severely underestimates the replacement cost in some areas. I am in an area where the costs are high, both to purchase and for construction. Routinely the RCE comes out 30 to 50 percent under the going rate in this area. A few of the companies will allow us to up the Coverage A 10-20 percent and attach the extended replacement cost endorsements. Some are a battle to negotiate a realistic Coverage A amount. So even though the companies say they adjust by zip code for the cost factors, many do not have them set at a realistic level to start with.
etimer
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Re: Insured to replacment cost or use extended endorsment

Post by etimer »

I think I like the language used by this company --

2. if you have:
Maintained coverage on the real property at 100% of its full replacement cost by paying renewal premium to reflect the
then current replacement cost. The current replacement cost of the real property will be based on the residential
construction cost index provided to us by a major appraisal company; and Notified us within 90 days of the start of
any alterations to the real property which increase the replacement cost of the real property by 5% or more; Then if at the time of loss the residence value indicated in the Coverage Summary is less than the current replacement cost, we
will:

d. Increase the residence value to equal the current replacement cost; e. Also increase the aggregate property
limit by the same percentage applied to the residence value; and

f. Adjust the policy premium from the time of loss for the remainder of the policy term based on the increased limit of
liability.

So if it is underinsured from full replacement they will "the policy premium from the time of loss for the remainder of the policy term based on the increased limit of liability."

I'd rather pay the premium due for the remainder of the term than be out $thousands of dollars.
FurriePrincess wrote:Another side of the coin with this discussion, the insurance companies who are using RCE software that severely underestimates the replacement cost in some areas. I am in an area where the costs are high, both to purchase and for construction. Routinely the RCE comes out 30 to 50 percent under the going rate in this area. A few of the companies will allow us to up the Coverage A 10-20 percent and attach the extended replacement cost endorsements. Some are a battle to negotiate a realistic Coverage A amount. So even though the companies say they adjust by zip code for the cost factors, many do not have them set at a realistic level to start with.
detroitgirl2
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Re: Insured to replacment cost or use extended endorsment

Post by detroitgirl2 »

Thanks guys. This is truly a teaching forum. I've decided to add a P&C license after tax season, but I'm going to try to partner with an experienced agency. Then I will be ready. I respect the expertise of others. Best way to learn. I will just add that change has come and is continuing. These forums help me to keep my eyes and my thinking open.

I also read the other post about the flip side. These are the free lesssons for today. Have a great weekend! Detroitgirl
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