Rebuild Like Kind/Qualty but code change
Anyone have experience (as a builder and/or as a home owner) with homeowners insurance claims and rebuilding where the building code has changed and “Like Kind and Quality” coverage won’t pay for increased code requirements?
For example, suppose a legit insurance claim to rebuild a 50 year old home after a fire. Costs $300K to rebuild the home to todays code. Will an insurance company actually ask the builder for a cost breakout of the recent code changes requiring hurricane straps and foundation anchors etc. and then subtract that amount from the claim payment?
Reason I ask….. my insurance agent approached me for getting some additional coverage on my homeowners policy for “Building Structures Coverage”. It is supposed to cover any additional rebuilding charges for new code changes (since my home was built) above my “Like Kind and Quality” coverage.
It’s an added $41/year about 4% of total premium. Is it necessary or is this like buying an extra 2 year warranty on a microwave oven?
Replies
Check the fine print. It's always there.
My policies state "replacement"....to replace w/ a sub-code property would be illegal.
Might he be reffering to changes like setbacks, footprint size, etc that are more of a zoning issue........ than how many outlets are on a wall, or if they are GFCI etc????
My policy is also "replacement cost". Not just what it costs to replace my 32 inch flat screen tv with a brand new one but also to rebuild the house. Has me a bit puzzled.
I recall asking the agent about "replacement cost"... he said policy covers whatever it costs to rebuild the home to same size, types of materials etc.
I am guessing there is some fine print about increased costs due to new code changes. Or they figured a way out of paying for those changes in the existing policy provisions whether replacement cost coverage or not. With all the big storm damages and claims, the insurance companies have to recoup costs or deny some of it any way they can. All without a rate increase. (Kinda like "excess fuel surcharges" some electric utilities are charging - a rate increase w/o needing approval).
I am wondering if any builder has run into this situation? I imagine it is happening big time down in the souther and gulf states.
sounds like warren buffett figured out a gimmick to get extra money.
Funny.......just got off the phone with the owner of the co that does all my insuranve. Apparently his sisters house burnt to the ground a week or so ago, and he needed info on getting her started on a new one.
He told me she was getting a check for $X from her ins co, and wanted to know what she should be looking at SQ Ft wise etc.
My point is......She has no plans, quotes etc.....nothing......but she already has a $$ amount from her ins co.
Your policy should have a "stated" or "capped" replacement value, and that is what you will recieve.....a check for that amount. If you choose to spend more (or less) on replacement, the difference is your problem, not theirs.
I agree with pickings. I just called a month ago about our home insurance policy. It seems that it covers my house for replacement up to the amount stated on the policy. I asked them what it means. They told me that if the house was insured for 150,000 and it was a total loss they would give me a check for 150,000 + 50% for contents. However, my house is only worth 130,000 and it would cost around $100 to $125 per foot to rebuild. So since my house is 2100 sq/ft then it would cost 210,000 to over 260,000 to rebuild. So there is the rub. In-order to keep up with the escalating cost of building in our area I would need to over insure my house just to rebuild it back. In other words after it would be rebuilt it would cost over 100,000 more than I could get out of it if I were to sell.Insurance companies are getting rich here in Texas. Since they removed the coverage for mold, foundation, weather and such they always stand to make money. I've been in my home over 20 years and when I first purchased my home my insurance was a little over $700 with $250 deductible. Now I pay $2700 and the non weather related deductible is 500 (weather related is 1% of house worth) and there are few things that are covered.Just my 2 cents ....
Check the price for $1000 and $2000 deductables and I think that you will be surprised at the savings.
BillI've checked on the price and am not impressed. If I were to go to 1000 I would save less than 200 per year. The area I live in is prone to bad weather occurrences (tornado alley) as well as problems with foundations. I guess the only real coverage the folks have in in our area is for fire. I'm surprised the insurance companies haven't figured a way around paying on that. Just my 2 cents....
Big difference in price.I am in Kansas City area which is also prone to tornado's, but I don't know the relative percentages.I could not lay my hands on last years, but the 04' shows $141,000 coverage on a 1600 sq ft home (25 yo, wood frame and siding), plus the over features that I mentioned in a previous message. And personal property is at 70% and not 50%.$1000 deductableCost $490.
BillWe're really getting ripped off here. I've got 160,000 on a 130,000 home with 500 deductible and I'm paying almost 5 times for less coverage.So as I stated earlier it's a big rip off.Just my 2 cents ....
"If I were to go to 1000 I would save less than 200 per year."
So you're figuring on making a fairly major claim every 5 years?
DonJust before the major change to the Texas home insurance industry 3 years ago, I had a major claim because of some plumbing issues. The main sewer line wouldn't drain properly and had to be replaced. Now if this were to happen I would have to foot the bill. The cost was around 15,000.11 Years ago I had a major claim because the foundation was not installed properly and a sewer line leek caused major settling of the foundation. The cost of the repairs for this was over 80,000. Again if this were to happen today I would have to pay the entire amount.My complaint is that even though I'm pay much more for my insurance I'm getting much less.So to answer your question, I have plans to increase my coverage and increase my deductible. It's a vicious cycle......
So there is the rub. In-order to keep up with the escalating cost of building in our area I would need to over insure my house just to rebuild it back. In other words after it would be rebuilt it would cost over 100,000 more than I could get out of it if I were to sell.
If you really would rebuild it back (that is you want to stay on that very lot no matter what), check you policy for the insurer's option for paying for the loss. A lot of policys give the insurer the option of either paying to repair the loss or if it's really a total loss, basically buying the whole place from you at fair market value. If that's the case, it might not pay to overinsure (either way, the ins. co. gives you around $150k -- but no more that that).
"Let's get crack-a-lackin" --- Adam Carolla
One think to look at is that there are several different "standard forms" (i think 5) for home insurance and I think that within those 3 for home owners that live in their single family homes.And each form offers a different package of coverages and features. Then there are riders on top of those. And then there are state to state differences. Then there are company to company differences.Now I checked my police and found;That in addition to the house coverage that there was an ADDITIONAL 5% avaiable for debre removal.An ADDITONAL converage for separate structures (separate or only connected by fence, utility lines, driveway, patio, or similar). It is 10% of the house coverage.An ADDITIONAL coverage for landcaping for 5% (with a max of 500 per tree/shrub).So depending on the circumstances there is up to an addtional 20% to rebuild.Now for the damages to the house it paysa) Acutal cash value if not repaired or replaced at the same location; Actual cash value upto the limits of the policy.b) replacement cost, if repairing or replacing at the same location the lessor of face value, replacement cost with EQUIVALENT CONSTRUCTION, or the repair cost.And I think that this is where the code endosrement comes in.Say you had an older house with 60 amp service in the garage and no DW on the ajoining surface. You have a fire in the garage that caused 50,000 damage. And no anchor boltsThe "basic" replaement cost would only that exact same construction. But the code does not allow that any more. The endorsement adds that it will pay the cost for adding those things needed to meet current codes.Now I have no idea how other polices are worded and use the same phrase EQUIVALENT CONSTRUCTION or similar.Now I also have an endorsement that has two sections
One the "building ordinance or law coverage"; AKA code changes. Now this adds paying for addition work above the EQUIVALENT CONSTRUCTION, but does not increase the total amoun that will be paid.The 2nd part is "Extended Replacement Cost".It will pay up to 125% of face valve for replacement if you insure for 100% of replacement cost. accept annual increase in valve (based on a construciton index), and modify them & pay for increased insurance for an improvements that adds more than $5000 value.
I honestly don't know the specific answer to your question (but I want to take a stab at it anyway).
As another factor to consider, if the place doesn't burn to the ground, there would be a cost to fix it. Most building codes allow you to repair a portion using the existing code, but leave the rest of the building alone. When you hit a certain sqaure footage or certain percentage of total square footage depending on where you are, you have to bring the entire place up to current code, even the parts undamaged by fire. That cost would be easy to break out.
"A job well done is its own reward. Now would you prefer to make the final payment by cash, check or Master Card?"
I have seen policies like this and we also have one just like it. It has an additional rider that covers things that might be needed to bring the home up to new codes.
One such item would be earth quake hold-downs on a foundation.
Seems that they were not required in 1930. Didn't they learn after the San Francisco earthquake???. I guess it just took another 80 years to get the code change...
Look for something called an "Increased Cost of Construction" endorsement, which pays to bring the repairs current with any codes, etc. that are being enforced as of the date of replacement.