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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 128651  
Subject: Home insurance Date: 4/3/2004 8:46 AM
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Recently we had a fire that completely destroyed our home.

Our house was insured for just over 100,000, now to some of you that may not seem like much, but that is "market" value for a house like ours in this area. And to build a house with the same square footage it could be done around that price. However, it would just be a bare bones house.

Here is the thread where I "talked" about it.
http://boards.fool.com/Message.asp?mid=20562701&sort=whole

This is the last post, currently, in that thread....I thought it was valuable enough to post over here.

--------------

If you have an older house, be sure your insurance company has taken into consideration the "charater" of your house in determining the replacement value. Our just took the square footage and multiplied it by the cost to rebuild an "average" house of that size.

I couldn't match the siding on our house, nor the wide inside trim. The back of the house is pretty plain, but to replace the front porches, especially the one upstairs would have been expensive.

In talking with a friend we decided to get bids from contractors to build a house exactly like what it is, in order to justify to the insurance company the insuraning it for more than it's "market value".

Our comunity is pretty old for our area, remember the west was settled after the east, there are many large homes built before 1930. I can buy them for alot less than it would cost to build a duplicate, if I could even find the material.

Just as an example the baseboards in our house were 1/2 x 10 solid boards with molding on the top. We don't really even have trees to make that size of lumber without knots.

When they redid our roof they had to change the molding at the edge because they couldn't match it....just stuff like that.

Your home is an investment, we (well, at least I) didn't think about all this stuff when we bought insurance.

Jean
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Author: anniesdad Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48789 of 128651
Subject: Re: Home insurance Date: 4/3/2004 10:12 AM
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Jean,
That's really to bad, it was a beautiful house. Do you mind if I ask how the fire started.

Scott

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48790 of 128651
Subject: Re: Home insurance Date: 4/3/2004 10:20 AM
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Scott,

We have no idea how it started. All anyone can determine is it probably started in the kitchen, because that is where the most damage is. It was too badly burnt to make any further determination. We were either at work or school.

There was a concern for awhile that it was to coverup a break in...since we couldn't find the tv's or monitors, but they were just melted away. One of the fire inspectors found the remnemts of one tv.

Jean

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Author: jfruhbauer Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48791 of 128651
Subject: Re: Home insurance Date: 4/3/2004 10:27 AM
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If you have an older house, be sure your insurance company has taken into consideration the "charater" of your house in determining the replacement value. Our just took the square footage and multiplied it by the cost to rebuild an "average" house of that size.

Thanks for sharing Jean - your loss will hopefully help someone else in the future. I would also switch insurance agents - they definitely should have considered this!

Jennifer

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48792 of 128651
Subject: Re: Home insurance Date: 4/3/2004 11:07 AM
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I would also switch insurance agents - they definitely should have considered this!

Jennifer


I'm certainly considering it!! Going to wait til this claim is clear tho'.

Jean

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Author: Stockbuyer2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48793 of 128651
Subject: Re: Home insurance Date: 4/3/2004 11:18 AM
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Jean

My heart goes out to you. Our home was completely destroyed by fire on Thanksgiving night 1996.

Many people have no idea just how much it cost to replace EVERYTHING.

It also felt very strange to us for a long time. It felt like we were living in someone else's home, wearing someone else's clothes.

The only thing I might suggest is that if you haven't already bought the new home you might want to wait and just rent in the meantime. We bought a couple of months after the fire and wish we had waited. It's kind of like people telling you to not make any major decisions after losing a loved one. When it first happens you're still somewhat in shock for several months.

Good luck and I'm sorry for your loss.


Stockbuyer2

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48794 of 128651
Subject: Re: Home insurance Date: 4/3/2004 11:38 AM
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Some neighbors of ours - about 4 doors down - lost their home around two years ago to a house fire. (Actually the home was about 3/5 destroyed and the insurance company wanted to try to salvage it, which everybody except the insurance company thought was a terrible idea. The contractors who looked at it said "You're kidding", but I digress.)

They had 90 days in which to report "contents", and they said it was one of the most trying parts of the exercise. Who remembers all the "stuff" you have, anyway? Much less trying to price it. But if it wasn't on the list at 90 days, they didn't get reimbursed for it.

So I immediately took out my video camera, went to the center of each room in the house, and did a slow 360-degree pan, then walked to each drawer and opened it, opened closet doors and poked around, and so on.

I didn't bother taking "good" pictures of everything, I can always "freeze frame" later if it ever comes to that (hope not!), but it's enough to jog my memory and remember paintings, vases, cameras in drawers, quantity of books, throw rugs, and all manner of other stuff that you would have a hard time recreating from memory.

The tape is in a safe deposit box at a bank, of course. If the house goes up, you don't want the tape to go with it!

Took about 45 minutes, as I recall. I haven't bothered to update it since we aren't acquiring much new stuff these days, but perhaps I will in another year or so, just to keep it somewhat current.
 


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Author: jfruhbauer Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48796 of 128651
Subject: Re: Home insurance Date: 4/3/2004 11:54 AM
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So I immediately took out my video camera

What an excellent idea - I am going to do that ASAP!


The tape is in a safe deposit box at a bank, of course. If the house goes up, you don't want the tape to go with it!

I've been thinking about getting a fire/smoke-proof box for my home - anyone know if these would do any good?

Jennifer

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48797 of 128651
Subject: Re: Home insurance Date: 4/3/2004 12:16 PM
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I've been thinking about getting a fire/smoke-proof box for my home - anyone know if these would do any good?

I have no idea, but I wouldn't take the chance. If you don't have a SDB, how about just leaving it in a drawer at work? Mail it to your parents? Give it to a neighbor? I'd keep it anywhere but the same place where you'd have to go wading through burnt timbers and water hoses to find it.

Fires are very weird things, as we found out from our neighbors' experience. Half their house was almost completely ruined. Hole in the roof, floor completely burned thru, that sort of thing. The other half was relatively untouched - except for some of the master beams where the fire followed in the floor hollow (which is why the contractors threw up their hands. They'd have had to rip it all open to replace anyway.)

Seems there was a votive candle on the coffeetable in the living room. Mrs. Neighbor set down the daily newspaper for a moment to go tell Mr. Neighbor something. When she got back, the flames had climbed the curtains and the house was ablaze. They barely had time to get the car out of the garage; they rescued one pet, two others died. Very sad.

And it all happened in just a few seconds; by the time the fire department got there it it was too late (although they did knock it down before it got the other half...)

Curiously, one of the fire guys told them "Sometimes it's better if the whole thing goes up, otherwise you're going to fight with your insurance company", which is exactly what happened.
 


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Author: wecoguy Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48799 of 128651
Subject: Re: Home insurance Date: 4/3/2004 1:02 PM
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Another way to document is a digital camera, snap pics of drawer contents, closets, all the rooms, garage, shop, everything, then burn them to a CD and tuck away.. And I'd pop 'em all up on one or two of the freebie photo storage site, or if your ISP has left you space, better yet.. The more detail the better.. same with financial files, access info, tuck 'em away somewhere offsite..

weco

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Author: NoIDAtAll Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48802 of 128651
Subject: Re: Home insurance Date: 4/3/2004 5:02 PM
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If you have an older house, be sure your insurance company has taken into consideration the "charater" of your house in determining the replacement value. Our just took the square footage and multiplied it by the cost to rebuild an "average" house of that size.

Thanks for sharing Jean - your loss will hopefully help someone else in the future. I would also switch insurance agents - they definitely should have considered this!



Sometimes that's a tough bill to fill. I recently computed a replacement cost computation on a large ornate older home using Marshall and Swift's estimating software, a respected insurance industry standard:
http://www.marshallswift.com/ecatalog.asp

Replacement cost came in at around $440,000. The approximate market value of the house was around $150,000. It's hard to find an insurer that will insure @ replacement cost when there's that much discrepancy from market value. Also, it's hard to talk many people into paying a couple/few thousand a year for homeowners insurance on such a scenario, and some people don't want to sit still though the (somewhat) in-depth questions the software addresses.

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Author: agg97 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48825 of 128651
Subject: Re: Home insurance Date: 4/3/2004 11:44 PM
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I've been thinking about getting a fire/smoke-proof box for my home - anyone know if these would do any good?

Don't put any electronic media in one of those! Even though they're fire/smoke proof, they still heat up when the fire is right there.

Put the tape somewhere, anywhere else other than one of those. Those boxes are okay for paper products and such, just not anything that is heat-sensitive.

-Agg97

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48870 of 128651
Subject: Re: Home insurance Date: 4/4/2004 10:57 PM
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Replacement cost came in at around $440,000. The approximate market value of the house was around $150,000. It's hard to find an insurer that will insure @ replacement cost when there's that much discrepancy from market value. Also, it's hard to talk many people into paying a couple/few thousand a year for homeowners insurance on such a scenario, and some people don't want to sit still though the (somewhat) in-depth questions the software addresses.

Plus the additional cost of the insurance. It's a tough call.

Jean


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Author: rsprang Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48903 of 128651
Subject: Re: Home insurance Date: 4/5/2004 1:01 PM
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I've been thinking about getting a fire/smoke-proof box for my home - anyone know if these would do any good?

Don't put any electronic media in one of those! Even though they're fire/smoke proof, they still heat up when the fire is right there.


There are two types of fire safes - those that are safe for paper, and those that are safe for electronic media. Get one that is safe for electronic media if you are going to put disks in it.

However, no fire safe is truly fire proof. It's still a good idea to have a copy offsite.

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Author: Johnboy001 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48920 of 128651
Subject: Re: Home insurance Date: 4/5/2004 5:31 PM
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Jean....my sincere condolances about the loss of your house, or should I say home. We have a neighbor in our developemnt who experienced a fire in her home over six months ago. It did not totally destroy her home...but she has not yet been able to move back in as repairs are still in progress. She did have insurance but has been living in a motel ever since. She should move back in soon. FIres are so tragic. Glad all family members are ok.

Johnboy

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48928 of 128651
Subject: Re: Home insurance Date: 4/5/2004 8:50 PM
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It did not totally destroy her home...but she has not yet been able to move back in as repairs are still in progress. She did have insurance but has been living in a motel ever since. She should move back in soon. FIres are so tragic. Glad all family members are ok.

Thanks, Johnboy, I think a partial burn would be worse. We have no hassles with going thru stuff...there's nothing to go thru. All the personal stuff is gone, and we just accept that, but to have to make decisions about "Is this too badly damaged to save would be heart breaking.

Jean

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Author: TheBoiler Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 49064 of 128651
Subject: Re: Home insurance Date: 4/8/2004 3:11 PM
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I am sorry to hear about your situation.

Just some thoughts on Insurance Values:

The key nmber is of course the cost of Rebuilding, not what you paid for it or for what it has been appraised. Apart from anything else, this would include the land value which is not relevant

I must admit I have not come across a residential situation where the cost of rebuilding is so much more than the house's market value. For commercial properties there is a way around this but I doubt if this situation arises enough for their to be a specific arrangement for residential properties, I fear the only solution is to bite the bullet and go for the higher number.

Very few fires completely destroy a house, and there are other risks covered by Insurance that would never result in a total loss.

I think the comment about having a record off site is a very good one, a quick tour with a digital camera, burn it to disk and keep a copy in a safety deposit box, or with family or friends.

Like so many things in life, the majority of people working settling insurance claims prefer the easy option and if you have all the data and have an adequately insured value, then everybody wins.



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Author: pacman1062 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 49065 of 128651
Subject: Re: Home insurance Date: 4/8/2004 4:43 PM
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Hi Boiler

I must admit I have not come across a residential situation where the cost of rebuilding is so much more than the house's market value

I guess it all depends on location. In my neck of the woods, this is common. Some of the towns where we have homes insured we are finding that 'Replacement Cost' is far and away LOTS more than the market value. Lots of our customers with Replacement Cost policies are being shocked when they get their renewals and see the results of the Replacment Cost Inspections that are being done.

It even amazes me sometimes and I've been an agent for almost 15 years.

Dan

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Author: rsprang Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 49085 of 128651
Subject: Re: Home insurance Date: 4/9/2004 9:02 AM
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I must admit I have not come across a residential situation where the cost of rebuilding is so much more than the house's market value.

This is very common with older housing outside of the 20 or so "housing bubble" cities. Around here, a typical house was built in 1930-1940, market value is $120K - $150K (including land), and rebuild cost is $150K to $300K. Now, that is to rebuild in like kind, style, and materials. Some insurance companies (eg Safeco) will not insure a house except for replacement cost - so they are losing a lot of business in this area (because people don't want to insure their $150K house for $300K). Other insurers will insure for replacement cost using modern construction techniques - so $200K insurance is more realistic for most folks, who would build a new house with modern construction instead of cloning the old house in the event of a total loss.

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Author: NoIDAtAll Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 49100 of 128651
Subject: Re: Home insurance Date: 4/9/2004 3:11 PM
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I must admit I have not come across a residential situation where the cost of rebuilding is so much more than the house's market value. For commercial properties there is a way around this but I doubt if this situation arises enough for their to be a specific arrangement for residential properties, I fear the only solution is to bite the bullet and go for the higher number.


There are various valuations available within the insurance industry for insuring homes or rental dwellings, just as there are for commercial properties. An, HO8 is a very common policy form that, generally, uses Actual Cash Value (ACV), rather than Replacement Cost. ACV is defined as Replacement Cost less Depreciation. Unfortunately, the HO8 policy form only insures against Basic perils and Theft is limited to $1,000. A few companies offer Broad Form or Special Form (the later covering all perils except those specifically excluded) policies with ACV valuations. Other valuations that I've seen offered include Stated Value, Market Value and Repair Cost (Repair Cost is kindof a hybrid, of sorts, as it pays the full cost of repairs, up to a policy limit that is based on a building's ACV.) Most of the alternative valuations are usually priced at a higher premium per $1,000 of coverage than a Replacement Cost based policy. St. Paul offered a Repair Cost Policy through Economy Fire and Casualty, when St Paul owned that carrier. IIRC, premiums were computed at a 40% surcharge to Replacement Cost premiums.

An important thing to watch for is a policy's co-insurance penalty clause. The penalty clause sets the minimum amount for which you should insure the house to avoid a penalty in the event of a claim to any building item. The most common co-insurance percentage used is 80%. If you have a house that has a replacement cost of $100,000 and you have a replacement cost based policy with an 80% co-insurance penalty clause, you should insure the house for at least $80,000 to avoid a penalty. The penalty is computed by dividing the amount of coverage you actually carried by the minimum amount of coverage you should have carried. So, if you carried $60,000 Replacement Cost coverage on a house that has a full replacement cost of $100,000 and the policy has an 80% co-insurance penalty clause, you will be paid only 3/4 ($60,000/$80,000) for any loss to the building. The penalty clause can actually cause you to be paid less, under certain circumstances, under a Replacement Cost based policy than you would be paid under an ACV based policy.

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