I had a big claim on a previous residence in 2014 (around $50k) due to a pipe burst when I was out of town. But worse than that, the "replacement value" the companies quite for my house is over the top, from $300,000 to $450,000. Comparable new homes go for no more than $250k and I paid $175k for mine. How do I convince them that they're way off on the replacement value?
As already alluded to, there is the demolition and cleanup costs if your house got leveled by a fire, tornado, etc. Building a subdivision full of homes assembly-line style is also cheaper than building an individual house on a unique site. If you have an appraisal calculating a different value than the insurance company does, fine- you have something to back you up, that they can wave back in your face if there is a dispute later. Just realize that the new home built by MegaHomeBuilder on a bare lot may be apples and oranges compare to a mature, settled neighborhood...and companies like to put in a little splash room because rebuilding costs fluctuate.
There is also usually a coinsurance clause (which has slightly different meaning than it has under health insurance).
Basically, if you insure for less than full replacement cost, if you have a loss, the amount you recover can be reduced proportionally to how much you under-insured.
Simple explanation- I have no afiliation with this site.
http://www.propertyinsurancecoveragelaw.com/2011/09/articles/insurance/what-are-coinsurance-clauses-and-do-courts-enforce-them/From the insurance agent's perspective, this is a potential legal shit-storm if they sell you a policy under-insuring your property. If you insure a $200,000 building for $100,000, thinking you'll make up the difference out of savings and/or build a smaller place if something happens, you're not going to get $100,000 on that loss. You're getting way less. Even if the company got you to sign waivers up one side and down the other, it's still a screaming client if something bad does happen, they tell their friends, etc. And then they'll sue the agent, or at least try.
Also, your Loss of Use coverage is based off your house's insured value.
If you want to save money on your policy, increase your deductible. Also take a good hard look at the "personal property" coverage on the policy. This is your furniture, clothes, appliances, books, all the Stuff in your house that isn't nailed down.* The default coverage amount is usually a percentage of the building's coverage amount. If you are a true minimalist, you won't have a whole lot of Stuff lying about. But consider that if your place burns down, you don't have time to wait for a Super Duper Closeout on your bed, your work clothes, etc.
Also make sure they have the right "zone" down for your house- how far are you from a hydrant? How far are you from the fire department?
*Jewelry, guns, collectibles, etc. are usually covered separately.
Guess what I did for a few stultifying years? :P (Thank God I got out). Your mileage may vary, see dealer for details, I don't even have my insurance license anymore.