It has been routine for several years to review home insurance and there has been a huge discrepency from the market value to the insurance value to whatever the replacement cost may be. Who’s right, who’s wrong, I have no idea. My default guestimate keeps me in the realm of $150 to $200 per finished square foot. But routinely this figure, combined with the figures set forth by the insurance companies are way off. Here is one that through me off; 106 Cedar Ave Poughkeepsie New York 12603.
About a year ago this was a vacant lot listed for about $70,000. Now it is this;
A brand new, pretty cookie cutter, 3 bedroom 2.5 bath 2400 square foot colonial. Here is where it gets tricky for me as the insurance person.
List price is $399,500
Lot price(estimate) $70,000
Leaves us at $329,500
So now we go into our insurance sites and run some estimates. Remember my quick math puts the replacement cost at $150 x 2400= $360,000 or $200 x 2400= $480,000 . Both figures of course would be insane. How is the builder making any money?
So lets look at company one; $396,600 and this is a very basic form. Lets make one slight variation, lets take the kitchen and baths from semi-custom to basic and now we are at $369,300. Still crazy.
Company 2 is pretty much as basic as the first and they come up with $418,559.66.
Both insane and both are very basic. I suppose I could be the one that is crazy. We can keep running numbers and in all likelihood will find nothing below $360,000.
Home insurance has been routinely under priced.
Home insurance has been routinely unprofitable.
If you want a mortgage you will need to get home insurance.
No solution, no answers…yet.
More on this thought later, not sure where it goes.