[MassHistPres] Possible cancellation of propertyinsurance in l

[slater at alum.rpi.edu]

>The quote I got back was astronomically high. If memory serves me
correctly,
>somehow they calculated the replacement cost of just the structure at
something
>like $750,000 to $1,000,000. (We paid $112K for the property, and it
was on the
>higher end of the scale for the area. It was a modest 1890s brick
rowhouse.) The
>woman I spoke to on the phone admitted they really only insure historic
>"mansions" and our humble property really didn't fit their model
properly. I
>went through a local insurance company that was happy to insure the
house, but
>still had issues with ridiculously high replacement costs. 

I purchased my house in 2000, and have had some insurance company
questions since then. The basic problem seems to be that insurance
companies are too used to insuring cookie-cutter houses, houses that
have a market value higher than their construction cost, and therefore
they can't figure out how to insure older homes, particularly to restore
them to the condition they were in before a claim.

For example, if all the windows in a newer house are damaged, odds are
the insurance company will pay for vinyl replacement windows. But what
if your windows have a very decorative pattern, something that can only
be crafted by hand? The costs skyrocket from $200 to maybe $1000-1500
per window. That doesn't fit their mold.

Most doors in modern homes are hollow-core, you can probably pick one up
for $100. Mine are paneled, veneered with quartersawn white oak,
finished with shellac. To recreate one would probably cost $1000 or
more. That doesn't fit their mold.

Most houses have drywall for their walls. Mine are plaster -- far
superior, in my opinion. It also costs 3 times as much to put in. That
doesn't fit their mold.

One problem that I've been hearing about is knob-and-tube wiring. We
have replaced all visible K&T in our house, but it's a 3-story house,
and we haven't ripped up walls and ceilings on the second floor to get
at outlets and fixtures. My insurance company put us into a different
rating category because of this -- costs $300 more per year to insure
just because of that. I've heard that some companies won't accept houses
with any K&T in it.

The market value of my house is around $300-400k. We have it insured at
around $800k, and the insurance company is satisfied that this is enough
insurance. The big problem is with partial losses -- if you don't have
enough insurance, even if you have "replacement coverage", they will
pro-rate the claim. They'll say "well, your house is insured at $400k,
but it SHOULD have been insured at $800k, so we're going to pay you 50
cents on the dollar for your $50k fire".

Since 2000, working with 3 insurance companies and 2 agents, our
strategy has been to over-insure the house - insure it for higher than
the market value, to a value that you think it would cost to replace it
if it was destroyed. This triggers an inspection (because they think
you're trying to defraud them), and then an inspector comes out and
takes note of all the nice things you have, and approves your insured
amount.

Ralph Slate
Springfield MA