can my lienholder make me carry more insurance for the replacement cost on my home than what I have left on my note. I owe 52,000 and my coverage now is 60,000?
Total Comments: 2
Posted: Fri Mar 16, 2012 05:23 am Post Subject:
First, what does your contract with the mort. company state?
Usually the issue is not the mort. company, rather your homeowners carrier. In order to get replacement cost value you need to have insured the home for at least 80% of it's value. Most insurance companies won't even let you choose the amount of coverage you have (which should be illegal and at least, they probably can't dictate this... but they do).
Lastly, I'm hoping the value of your home is more then you owe and also that the replacement cost is higher then that. As such, it makes no sense to think you have replacement cost coverage if you only insure it for what you owe.
For example... you owe $52,000 on your home yet you have coverage indicating the cost to completely rebuild the dwelling itself would cost $60,000. So the actual value of the home must be far less then $60,000. I hope not.
Posted: Mon Mar 19, 2012 06:59 pm Post Subject:
As the other poster mentioned you do want to have at the property insured for at least 80% of the replacement cost value. This does NOT mean the fair market value either, many people feel that due to the property values going down they should not have to pay for as much coverage when in all reality the costs of construction may have fallen a bit they have not dropped as much as the property values. The insurance company is not going to buy you a house down the block if yours burns down, they are going to pay to demo what is left and rebuild to the same specifications as you had.
Another potential problem that can happen when under insured is that if you have a claim and they determine that you were insured for less than 80% of the replacement cost value you will incur a "Co Insurance Penalty". The penalty will be based upon how far under insured the property actually is.
My recommendation, don't mess with it and have the proper amount of insurance. It can create headaches that you don't need and the premiums for the policy will most likely not change that much.
Posted: Fri Mar 16, 2012 05:23 am Post Subject:
First, what does your contract with the mort. company state?
Usually the issue is not the mort. company, rather your homeowners carrier. In order to get replacement cost value you need to have insured the home for at least 80% of it's value. Most insurance companies won't even let you choose the amount of coverage you have (which should be illegal and at least, they probably can't dictate this... but they do).
Lastly, I'm hoping the value of your home is more then you owe and also that the replacement cost is higher then that. As such, it makes no sense to think you have replacement cost coverage if you only insure it for what you owe.
For example... you owe $52,000 on your home yet you have coverage indicating the cost to completely rebuild the dwelling itself would cost $60,000. So the actual value of the home must be far less then $60,000. I hope not.
Posted: Mon Mar 19, 2012 06:59 pm Post Subject:
As the other poster mentioned you do want to have at the property insured for at least 80% of the replacement cost value. This does NOT mean the fair market value either, many people feel that due to the property values going down they should not have to pay for as much coverage when in all reality the costs of construction may have fallen a bit they have not dropped as much as the property values. The insurance company is not going to buy you a house down the block if yours burns down, they are going to pay to demo what is left and rebuild to the same specifications as you had.
Another potential problem that can happen when under insured is that if you have a claim and they determine that you were insured for less than 80% of the replacement cost value you will incur a "Co Insurance Penalty". The penalty will be based upon how far under insured the property actually is.
My recommendation, don't mess with it and have the proper amount of insurance. It can create headaches that you don't need and the premiums for the policy will most likely not change that much.
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