I received a call on Friday from a woman in Frisco, Texas on Friday who wanted me to review her home and car insurance. The family’s rates are going up on their upcoming renewal in August, and like most people she doesn’t want to spend more on her insurance than she has to. I don’t blame her!
Since Linda (not her real name) is new to us, I gathered the general information I needed to begin her quotes including names, dates of birth, address of the home, and how long the family has lived there. Before discussing Linda’s home, I let her know I was going to ask several questions about her family’s home. The purpose of my questions is to provide data that will be used by each of the 12 insurance companies I work with in determining the insurance value of her home. A home’s insurance or dwelling amount has nothing to do with what the home could be bought or sold for or it’s assessed taxable value. The amount of coverage may also differ from the amount for which the home is currently insured due to changes in estimated construction cost.
The information we gather to determine a home’s insured value includes:
- Year the home was built and square footage
- The number of stories
- Number of bedrooms and bathrooms
- Living areas
- Type of floor coverings present
- Kitchen and bath grade
- Exterior and interior features
- Home changes due to a remodeling project
- Updates made to the home (roof, HVAC, electrical, plumbing)
- Information about the garage
This data is very important and provides the prospective client and me the opportunity to collaborate on properly insuring their home. Each insurance company I work with has a replacement cost system it utilizes to determine what amount of coverage is needed to replace the home if it were completely lost, say to a fire or tornado strike. The amount of insurance must cover three things:
- Demolition work needed, partial or complete
- Removal of all debris
- Rebuilding a singular home vs multiple homes
There are many costs most people don’t think about that are incurred when rebuilding a home including:
- Home plans / architectural drawings
- Grading the lot
- EPA skirting to prevent eroded soil from going into the drainage system
- Port-o-potty for the workers
In addition, material procurement cost for one home instead of for multiple homes due to the loss of quantity discounts on building materials. Labor costs can also be more and there are delivery costs to have materials delivered to the construction site. There are a number of people in West, Texas and the Oklahoma City, Oklahoma area that are wrestling with what to do after experiencing total losses and finding out their homes were not insured adequately.
While Linda and I were discussing the information she provided, she sent me a copy of their current insurance declaration page. This shows the current levels of coverage on their home. I divided the dwelling value by the square feet of their home and realized it’s insured for a little more than $92 a square foot. Most insurance companies are insuring homes in the Dallas / Fort Worth area for $100 to $130 a square foot, depending on the finish out. I realized Linda’s home was underinsured and shared with her what I thought would happen: that the replacement cost value would come in higher than her current level of coverage.
Most people I work with are grateful for the effort I take to adequately insure their home. I’ve only had one prospective client who was curious why I asked her all these questions as none of the other agents did. That made me wonder how well her home was insured. I’d hate for anyone to find out after a total or near total loss they were underinsured!
I know I’ll be able to offer her a competitive rate on her home and auto insurance, but it may or may not be lower than what she’s currently paying for home insurance. Regardless of what Linda decides, I know I will present an accurate quote to her and their home will be insured for its full replacement cost value.
Do you have a question, comment, or experience you’d like to share? Please share them on our Facebook page or in the comments section of our blog. I’d love to hear from you!