Determining home replacement cost?

[DougStache]

Hey all,

I imagined this had been asked before, but I haven't had any luck finding any threads specific to this topic.

My wife and I are in the process of closing on a home, and I am shopping for home owners insurance.  The biggest factor in the rate is the home's replacement cost, and I am having troubles finding any information about how to accurately determine this.

The home in question was built in 1999 and the original owner paid ~$125,000.  We are buying it for $127,000, and it appraised for $128,000.  On the appraisal, they say the replacement cost is $131,000, but $35,000 of that is for the land.  Would you get insured for the full $131,000?  Or $96,000 (total value minus land value)?  Or would you want to pad this?

Thanks for the help!

[apennysaved]

My understanding is that the land should not be included in replacement cost for insurance.  If you are getting a loan, you will probably have to insure for the mortgage balance regardless of replacement cost.

I recently got my insurance reevaluated.  I ended up with a lower premium because we paid off a chunk of the mortgage (higher than the replacement cost because we are waterfront & the land value drove a lot of the sales price resulting in the mortgage being higher than the replacement cost).  Also, the insurance agent said that they are classifying some previous items that were considered upgrades as standard which lowered the premium a little bit more.  Don't know if this is company specific or across the industry.

[DougStache]

My understanding is that the land should not be included in replacement cost for insurance.  If you are getting a loan, you will probably have to insure for the mortgage balance regardless of replacement cost.

I recently got my insurance reevaluated.  I ended up with a lower premium because we paid off a chunk of the mortgage (higher than the replacement cost because we are waterfront & the land value drove a lot of the sales price resulting in the mortgage being higher than the replacement cost).  Also, the insurance agent said that they are classifying some previous items that were considered upgrades as standard which lowered the premium a little bit more.  Don't know if this is company specific or across the industry.

Coincidentally the mortgage amount and replacement amount (minus land) are about the same. Insurance companies, by some mysterious algorithm, have been wanting to assume as high as 207k replacement cost. Seems they just want to drive up premiums?