Homeowners coverage


Super Genius
Does anyone know the current cost per sqft standard in North Texas? My house is valued at $520k, at the moment. The land value is $110k, 2650 sqft, one story, built 2008, 2 car garage, standard everything. USAA has me with coverage of $506k because I put it at $506k when the prices were rising. I owe about half the value right now. It's pretty unbelievable but they couldn't give me an accurate estimate of what the house should be insured for currently. They kept saying $506k and I kept telling them that is the number I put on the property itself a while back when prices were rising. A house just burned down around the corner so I started looking at my insurance. If the house did burn down, I'm not rebuilding I'm probably moving. I only want to pay what is correct, and maybe a $25k cushion. Seems like I've been over paying for years. This might be a good way to open the door to new customers for p&c agents. Or a good way to lose your customers when they start checking if they are over insured. Thank you!
You are suffering from a popular consumer misconception. The market value of a house has nothing to do with the cost to rebuild it. Neither does the assessed value for tax purposes.

$506k is about $190 per square foot which may be a little light at today's construction costs.

It's possible that a house could cost more to build than it can be sold for. In some places it can be the other way around.

I have used "Cost to Build" to calculate the cost to rebuild my house. It has always come pretty close to what my insurance company calculates. Try it.

Calculator step 1 – Cost To Build
Similar new homes are going for $555k. Your calculator is showing $575k but I did it a level III. It's one story but crazy roof angles.
So $555k - $110k (land value) = $445k.
And $445k + $25k (buffer) =$470k
$470k should be a safe number to insure the house? Even at the $575k number this seems inline.
Thanks for your help!!
$470k should be a safe number to insure the house?

I wouldn't want to guarantee it, but you're probably in the right ballpark. If you are comfortable with that figure you can go with it. Make sure your policy has an inflation guard where the property coverage automatically increases every renewal and recalculate for each renewal.

You might talk to the owner of the house around the corner and see how much it will cost him to rebuild. That could give you some real-world figures to compare to.

All we are doing here is speculating and hoping we have enough to cover the worst-case scenario and hope it never happens.

I just did mine and got a shock. 18 months ago the calculated RC was $251,569 (1400 sf house). My agent used his calculator and came up with $229,000. I went with the $229,000. After deducting the cost of concrete (my slab would be reused) mine came in about $220,000.

My renewal last June automatically increased to $238,000.

My calculator today came up with $317,328. $46,214 of that is concrete leaving $271,114.

I have asked my agent to recalculate with his software.

Meantime I am comfortable with $238,000 until next June's renewal because my policy has an optional coverage that adds up 40% to the dwelling coverage in the event that $238,000 is not enough to cover the rebuild of a total loss.

You pick the amount of coverage after looking at all the variables and being knowledgeable about your policy coverage.

I'll come back when I have my agent's figures.
In NY, replacement cost is around $350 per square foot for standard HO carriers. Do not include the land as it doesn't burn. I'm inclined to think that TX is not far off. As a side note, carriers are indicating that they will be increasing at least 25% next year. I've seen $900 in the high net worth arena.
I know that there are arguments in both directions but I am taking the position that my concrete slab on grade with footing would be reusable in the event of a total fire. Therefore I am not including the concrete in my replacement cost calculations.
USAA isn't using something like Xactware to determine the initial rebuild value?

I don't know what they were doing but it seems like a pretty rudimentary thing to be able to do at an insurance company. I figured that was something they heard every day.
I don't know what they were doing but it seems like a pretty rudimentary thing to be able to do at an insurance company. I figured that was something they heard every day.

Materials & labor costs have been changing so rapidly in recent years & both can be very geographically dependent.

It can take the 3rd party construction software companies that supply insurance carriers a couple quarters to catch up as they obtain the current actual costs from local builders & suppliers
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