Monday, October 27, 2008

Homeowner's Insurance

My bank, like most, if not all banks, requires that I have homeowner's insurance. This requirement seems reasonable to me.

For the purposes of this discussion, the price we are paying for the house will be referred to as X. I looked around, and it seems that we've managed to get a good deal - to buy a comparable home (same build quality, size, and size of lot) - would cost 2X. This seems a reasonable amount to insure the house for.

However, while I was able to get quotes online for insurance at this level, when I called up one of the companies, they stated that they would only insure for full replacement cost, and that if something were to happen to the house, that they would rebuild it.

I have no interest in a new house. Zero. There's just no way that a new house would have the charm or character that this one does. What I would want is to buy another similar house. This insurer estimates that the cost of rebuilding would be 4X. Base upon what I know about construction, and given all the extra features that they didn't ask about (and I didn't mention), I suspect the cost of rebuilding would be closer to 6X.

I don't want to pay for insurance on a house costing 6X. I just want to be able to get another similar house in the neighborhood if something catastrophic should happen to mine. Why is this so difficult?


Kurt said...

If it's postwar, you couldn't build it at all today. Code enforcement would never allow it. The labor cost are too high now with the contractor being fully insured and OSHA compliant. Many of the materials can't be sourced easily today: (Old-growth lumber, hand-blown glass, plaster walls, etc) Not to mention the lack of skilled labor needed to build the house of the same quality using these archaic materials and building practices.

Basically, your house is priceless because it would be nearly impossible to rebuild it today.

Insure it enough to protect your investment and make the bank happy. Bob forbid; ff it should be lost, it will be a great tragedy and you'll just have to move on.

Kurt said...

Oh, yeah take good care of that place!
I know you will ;)

Anonymous said...

I have heard that "Travelers" does older homes. And, apparently, you can get extra riders on your insurance policy to cover the full replacement cost of historic materials. I think there's some extra documentation work that goes along with it, but that may be worth it for you guys.

Can your agent (or lender) make any recommendations? If s/he sells a lot of homes in the area, I would think this question would have come up before now.

(Can't speak from personal experience - we just have a standard policy, since our house is missing all the original fabulosity. We're with the same company that does our car insurance - discount for a bundle, etc).

-Mary Beth

Christopher Busta-Peck said...

Mary Beth -

That's a good idea, about asking the lender or agent.

I should clarify - I'm not looking for a policy that covers all this historic stuff - rather, I just want something that will cover enough to buy a comparable home in the neighborhood, if disaster should strike.

The problem is that, as Kurt states, you simply cannot build a 1920s home again, which is what the insurers seem to want to do. They base their insuring estimates on what it would cost to build such a home again, not the price that a similar home would sell for.

Thanks for your ideas - I will be sure to check out Travelers.

Jenny Kerr said...

we have very high insurance quotes for our home and I'm not sure why, for some reason more than double what the realtor said the PO was paying and also more than double what the bank had estimated. The PO was with Travelers and I guess if we switch our car to being covered by them, (I really would rather stay with progressive) it will get it down around $1100 a year. Maybe this isn't high, I don't know, but when the PO was paying 6 and the bank thought no more than 5 it seems like a lot. Some companies told us it would go down if we ran central heat and air, but would go down more if we replaced our plaster with drywall. That's a lot of work and I did think about it, but I think probably my best bet is just to pay the 3 or 400 extra a year to keep the plaster. No one seems to know WHY it's more for the plaster if we AREN'T specifying same material replacement.

We are like you and just want enough out of it to recoup what was lost by all sides so we aren't out anything (moneywise) should it spontaniously combust. They said it would take at least $300,000 to replace it, that is almost ten times what we paid for it. That won't replace my personal belongings like photos etc and the house isn't very unique I guess on it's own so why bother trying to rebuild it. It's just a generic foursquare apparently (from posts on my wood id help thread on oldhouseweb) made of plywood and other cheap woods. It is NOTHING like all these other homes I see on blogs where every inch is some highly detailed carved exotic wood with tons of cool built ins and such. I can't understand why so much to replace last centuries Kmart quality building supplies. LOL.

Ranty said...

LOL! This is so typical.

My insurance agent basically told me that my house-to-be was so run down it was a worthless pile of twigs... but to rebuild it would cost a gozillion bucks.

In the end it didn't really matter, since the poor condition of the home disqualified it entirely from getting market insurance.

Hellooooo "Minnesota Fair Plan."

(This is the high-priced fallback insurance for the uninsurable. This is now the second house on which I've had to obtain it!)


Jane said...

I agree with you completely regarding the insurance on your "X" home rather than a new home for insurance costing "6X". My dream home is also in Shaker Heights and it's amazing how many people have said I should buy a newer home. I've ALWAYS wanted an old home (preferably 100 years). My dream home is 80 years old and I will be there to help usher in it's 100th birthday. If something catastrophic were to happen to my home, like you, I would want another old home, very, very similar to mine. By the way, I love your blog!