So I recently got 3 online quotes for homeowners insurance. I'm in Northern California Sacramento area.
House is 2585 sqft. My current policy has replacement cost at $653k for the dwelling. My house is worth about $700k if I sold today. New construction homes are selling for $650k-$760k for roughly the same size house in my city & on smaller lots.
So I got an online quote from Mercury and it gave me a replacement cost of $630k for my house. I bumped it up to $650k to closely match my current coverage. The other two automated quotes had dwelling replacement cost in the same $650-680k range. I purchased the policy from Mercury online. The local agent calls me today and mentions my replacement cost is low & suggests a replacement cost of just over $900k for the dwelling at a much higher premium of course. I told them their own quote system actually had it lower & I actually bumped it up. Why would they try and get me to switch it to a much higher amount? Are they just trying pad the sale? $900k+ seems quite excessive imo. The whole interaction left a bad taste in my mouth about Mercury.
Posted by Smoker916
4 Comments
Ask the agent to show you the replacement cost estimator. Perhaps they included something not initially accounted for on the $630K quote. Estimators pull from public data, but they often don’t capture everything.
Keep in mind reconstruction cost does not match market value. Lot/land/real estate value is not considered. Only labor, materials, degree removal, overhead fees. It is possible that the dwelling will be lower than market value. For example Detroit MI, you can get a house for 40k and reconstruction be 200k, you can have million dollar property with 40 acres, but dwelling only be 300k. I would recommend you get a replacement cost estimator and make sure all your building materials are correct. For ex: if you have hardwood in the home, make sure it says that and not vinyl. These details determine your dwelling.
I was a a large loss adjuster my last few years before I retired. Majority of people think they have way too much coverage until they suffer a major loss, at which point they are typically shocked at actual costs to rebuild their homes.
Fires happen for all sorts of reasons – wildfire, car parked in the garage catches on fire (setting the house ablaze), wires short out, customer puts hot embers from the fireplace (2-3 days old) into the trash, contents of trash can catches in fire, house then catches on fire. It can happen to anyone. You get the drift.
FD responds, they put a TON of water on the fire and also pull down ceilings/tear down wet insulation making sure they put out the entire fire (it’s a bad look for the fire to rekindle and them having to come back 5/6 hours later to put even more water on it, but this happens too).
Adjuster works with the insureds contractor to reach an agreed upon scope & cost to repair – oftentimes it costs more to clean/dry the structure than to demo & rebuild.
If you do repair, cleaning out all damaged Sheetrock/carpet/wet insulation etc and then drying out the structure w fans & dehumidifiers can run $25k to $75k or more (depending on the size of the house & extent of damage). Cleaning & deodorizing smoke damage can and will cost way more than you ever thought it could.
If the house is to be rebuilt you have to demo what is left standing ($12k to $40k depending on how much is left standing & other factors) and then you have to hire an engineer.
My point is it can easily go past the cost to rebuild the house to actually rebuild the house (don’t forget about local permit costs, depending where you live those can add up as well as any required code upgrade costs).
If you’re unlucky enough to lose your home in a wildfire then you are going to be competing with all the other fire victims in finding a contractor to rebuild. When demand for rebuilding increases so do rebuild costs. I had several customers all over N. CA learn that the hard way. That contractor search also adds to the number of months spent in temporary housing (and customers run out of that coverage too depending on the availability and cost of rental properties in the local area). Don’t get me started on the delays after CA wildfires with the associated soil testing.
In short, overestimate the cost to rebuild your home and then add in another 10-20% to come up with Coverage A.
As with everything else in life it will cost way more than you think it will to repair or rebuild your home. You don’t want to run out of $$ if it happens to you.
I’m a Mercury appointed agent from your area. Based on your home square footage, the agent is trying to get your cov A to $350 sq. ft. which isn’t absurd or trying to pad a sale IMO. 300-350 sq. ft. is pretty standard for much of Sacramento.
While I don’t know the details of your property, your current cov A of ~$250 sq. ft. would make me really uneasy if I was your agent as you may not have enough coverage to fully rebuild in case of a total loss. They are in all likelihood looking out for you and trying to get you to properly insure your home. That’s course at the cost of a higher premium but that’s the trade off. Would you rather save on your premium or be properly insured? I know what side I would fall on that but it’s totally up to you in this case.