Author Topic: Need Advice RE: Homeowners Insurance Coverage  (Read 4331 times)

starterstache

  • 5 O'Clock Shadow
  • *
  • Posts: 42
Need Advice RE: Homeowners Insurance Coverage
« on: October 12, 2014, 03:38:15 PM »
Hi Mustachian Family -

I'm looking for some advice on my current homeowners insurance policy before I go shopping around for more reasonable coverage.  For starters, here are a few facts about our home:

3 bedroom + loft / 2 1/2 bath; 2100 sq ft.
Outstanding Mortgage:  $263K
Approx Home Value: $400K
State: Southern California

Here are the details on my current homeowners policy:

Company - Liberty Mutual
Yearly 12 month premium = $629 (or ~$52/month)

Standard Coverages:
Dwelling - $296K
Other Structures - $29.6K
Personal Property w/Replacement Cost - $208K
Loss of Use of Insured Location - $59K

Personal Liability (each occurrence) - $300K
Medical Payments to Others (each person) - $5K

Current Deductible:  $600  (this seems really way too low to me, would increasing to 1 or 2K help?)

There are some additional coverages that are included in the rate, but it doesn't seem like anything of importance.

My questions are:

1.)  Are my coverages sufficient for this property?  Am I actually over-insured given the cost to actually rebuild a house on already paid for land?
2.)  Am I getting a decent rate for this level of coverage and deductible? 
3.)  Should I consider raising my deductible?  If yes, recommended amount.
4.)  If I do switch insurance carriers, do you have any recommended companies to pursue for quotes?
5.)  Anything else I should consider? 

Thanks in advance for the valuable input from the MMM community.  You guys/gals are awesome!

Best regards,
Starterstache



Another Reader

  • Walrus Stache
  • *******
  • Posts: 5242
Re: Need Advice RE: Homeowners Insurance Coverage
« Reply #1 on: October 12, 2014, 05:14:41 PM »
Depending on where you are in Southern California, the cost to replace a house could easily be $150 to $200 per square foot plus the garage.  That would include the foundation, which might not be usable if it were subjected to extreme heat in a fire.  So full replacement cost could be as high as $420,000 plus the garage.  You may also want to look at your liability limit, especially if your net worth is significant.  Best to get the agent and any competitors to run a full replacement cost estimate on the house.

Raising the deductible to whatever the lender will permit will save you some money.  Typically that is $2,000.  Filing a claim for a small loss is not smart anyway, so I take on the risk of small losses.

Typically you get discounts for getting your auto and home insurance from the same company.  I have State Farm, which is not the cheapest, but has provided good service in all my dealings with them over 40 years. 

hwstar

  • 5 O'Clock Shadow
  • *
  • Posts: 24
Re: Need Advice RE: Homeowners Insurance Coverage
« Reply #2 on: October 12, 2014, 06:05:21 PM »
Of all the things one must shop for, insurance is the most painful.

For homeowners insurance in California, I use the department of insurance website to look up the premiums on their annual survey:

https://interactive.web.insurance.ca.gov/survey/index.jsp

You select some key parameters which roughly match your property.

The survey rates will be all over the place pricewise, and the results will be surprising.

You then call the lowest cost sources and get quotes more tailored to your property and select the one with the best coverage and cost.

I chose CIG insurance as they seemed to give the most product for the least cost.


merula

  • Handlebar Stache
  • *****
  • Posts: 1448
Re: Need Advice RE: Homeowners Insurance Coverage
« Reply #3 on: October 12, 2014, 08:29:07 PM »
Do you have an independent agent? If not, get one. They can answer all the questions about adequate insurance to value and shop around to get you the best price, which in my experience is cheaper than online sources. (I checked this spring; ran my needs against 4 different direct markets and all were at least $100/year more than I'm paying now.)

Be sure you have replacement cost coverage on the building, too. You might know exactly how much your house would cost to rebuild right now, but that will be completely blown out of the water if some widespread disaster hits and there's a huge demand for contractors and building materials. (Speaking of disaster, you're in southern California? Do you have earthquake coverage?)

And any agent worth her salt will probably try to sell you an umbrella. That's not a bad thing, they're worth having in the right situation. There's a deep discussion here: http://forum.mrmoneymustache.com/ask-a-mustachian/umbrella-insurance-yay-or-nay/?topicseen




MountainGal

  • Pencil Stache
  • ****
  • Posts: 614
Re: Need Advice RE: Homeowners Insurance Coverage
« Reply #4 on: October 13, 2014, 03:07:09 PM »

My questions are:

1.)  Are my coverages sufficient for this property?  Am I actually over-insured given the cost to actually rebuild a house on already paid for land?
2.)  Am I getting a decent rate for this level of coverage and deductible? 
3.)  Should I consider raising my deductible?  If yes, recommended amount.
4.)  If I do switch insurance carriers, do you have any recommended companies to pursue for quotes?
5.)  Anything else I should consider? 

Thanks in advance for the valuable input from the MMM community.  You guys/gals are awesome!

Best regards,
Starterstache

Insurance agent with over 12 years experience here.

1.  No.  Talk with your agent about running a MSB on your property.  As mentioned above, you want to aim for a higher per square foot replacement cost.
2.  Yes.
3.  Yes, to at least $1,000 if not $2,500
4.  In my state, Safeco and The Hartford have decent rates at the moment.
5.  Ask for any and all available discounts, including package, claim free and safety such as dead bolts, smoke detectors and alarm, if applicable.

retired?

  • Pencil Stache
  • ****
  • Posts: 665
Re: Need Advice RE: Homeowners Insurance Coverage
« Reply #5 on: October 13, 2014, 08:28:16 PM »
How much of the $400k value is land value?  Don't need to insure that.  I have had interesting conversations with agents that feel that sales price plus some cushion should be used.  Without knowing that, to me, it is hard to say whether you have enough coverage.  Your lender hasn't complained so perhaps enough.

The 208k in personal prop loss sounds high but, in my experience, lowering it doesn't change your premium too much.

Do check on the deductible.  Yours is incredibly low.  It has the biggest single impact.  The norm is often 1% or 2% of coverage.    Yours could be $3-4k or higher.  In my view, if changing it to that level does not lower your costs much, then stick with the 600.  But, really, 600 is the sort of deductible you have on a car.....much higher likelihood of using that.

I recently switched to Allstate.

Your rate seems decent, but I've never lived in that area.  I paid 1300 on a 900k home in Illinois, but now pay 2300 on a 400k home in Texas.  Natural disaster and crime seem to be the largest factors.