Tipping point on home insurance?

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.

What gives?

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.