Insured to Replacment Cost

[URDRWHO]

Ok let's get it out of the way that a guaranteed replacement policy is as rare as a unicorn.

The policy's today expect you to insure to replacement value and that is why they want the completed RCE.

So I have a policy that has $623,000 on the dwelling. The value was set my the MSB cost estimator. I ran an on-line build estimator and came close enough at $597,000.

So customer goes out and shows the policy to a competitor and they do a quote with the dwelling at $430,000 with a 50% coverage extended limits coverage.

I hear the competitors sales math ---

With an extended limits endorsement of 50% of $430,000 it gets the dwelling up to what you now have.

Ran this idea by several different agencies that I know --- just to be sure my head was on straight. Yes the math works out but the insurance companies want coverage A to be at replacement value and than the extended limits is a just in case cushion. I know the people at the other agencies, one has 27 years experience, the other has 20 years and me ....been licensed since 1984. Perhaps this is a new way to sell?????

In the above example coverage A cost is $858 and the endorsement is $51. Insurance companies aren't stupid --- well at times that can be debatable.

Is the example using the extended coverage trying to game the insurance company, hoping that the inspector won't say anything at the policy inspection. Maybe there won't even be an inspection and they get by with it.

The example doesn't even get into the lower limits on personal property, etc.

 

[insurance1822]

I have 3 carriers who don't verify RCE on inspection & I do this all the time. We all know certain carriers are insanely egregious w/ their RCE's. I insure a large contractor in my market who's the "go-to" on rebuilding homes after a fire loss & I've had this conversation plenty of times w/ him.

When the competition & or some of my carriers are playing the built in garage game wanting to insure a 2,500 sq ft home w/ a 2 car built in garage to $550,000...I'll write it w/ one of my mutual's at 350k w/ 50% dwelling extension (for an extra $35/year.)

The client is getting the same dwelling coverage in the event of a total loss, the personal property can be raised if need be (and the personal property is typically overkill anyway.) I've been through enough total losses & the personal property never sniff's the limit unless it's a 125k dwelling home w/ 4-5 people living there.

IMO this is us doing our jobs as agents. Wading through the insurance companies BS to get our clients the best deal. I ALWAYS include 150% extension if I go down this road & I go down this road a fair amount.

We all know why insurance companies force the coverage A limit & that's because regardless of the limit shown...if they're getting "replacement" cost coverage & it goes to court...the limit shown on the dec doesn't matter after the sleeze lawyers get involved. Some of the coverage A RCE's are just criminal even when considering debris removal.

 

[hesse]

Run into this with state farm a lot around here.

We insure to RCE and the additional 125% or GRC is for additional costs(ie increased construction costs from CAT Losses) Generally speaking your probably fine writing it below RCE and using the extended coverage to get it rebuilt but if something major happens its gonna be an E&O claim

 

[URDRWHO]

I pulled out my own Travelers policy -

Additional Replacement Cost Protection

(Applies only when loss to the dwelling exceeds the Coverage Limit of liability shown in the Decelerations)

To the extent that coverage is provided, we agree to provide an additional amount of insurance in accordance with the following provisions.

a. If you have

(1) Allowed us to adjust the Coverage A limit of liability and the premium in accordance with:

(a) The property evaluations we make; and
(b) Any increases in inflation; and



Ok, I am thinking that Travelers isn't going to let you game them on Coverage A and then let the Additional Replacement Cost Protection (Extended protection) apply. FYI on my Travelers it is 25%.

Then there is that silly, silly little Loss Settlement something about 80% of "replacement cost".

Then there is the little problem of not complying with (a) The property evaluations we make.

I mean how many different clauses should they put in the contract to make the customer realize that "they" the insurance company want you to insure at replacement value?

Is it all worth pushing into the gray regions for that commission?

As far as determining value for coverage A without an RCE. Nope, not me, not gonna do it. I'd never want the trial attorney asking if I am a professional? Then as a professional shouldn't you have helped your client determine the correct value of their house. In a total loss and the clients were not aware of any clauses such as previously mentioned..........it is easy to spell E&O.

Thirty years in business and I've never had an E&O claim and don't plan on it. A commission is not worth the headache.

If it were me I would be pulling out a policy and reading the Extended Coverage Clause.

WIth Travelers it is The Additional Replacement Cost Protection is on form HO-420

An older ISO form but ya get the idea..........

http://ic.iiat.org/docs/iso_forms/HO/H04201000.pdf

I have no access to Mutual companies so I don't know what they do ...now wait or do I?

Run into this with state farm a lot around here.

We insure to RCE and the additional 125% or GRC is for additional costs(ie increased construction costs from CAT Losses) Generally speaking your probably fine writing it below RCE and using the extended coverage to get it rebuilt but if something major happens its gonna be an E&O claim

 

[insurance1822]

Sounds like you've got it all figured out & I'm curious why you even bother carrying E&O?

How big is your E&O trophy?

 

[URDRWHO]

All people need to do is follow the rules first....sales second. I see far too many agents doing it the other way around.

I'm not the one trying to circumnavigate the rules --- some people do.

Why carry E&O?

It is morally / ethically responsible
Without it you aren't going to get to do business with many companies

E&O trophy? It is a good claims history and makes my annual premium payer happy.

Not sure why but I detect a bit of snarky??????

Sounds like you've got it all figured out & I'm curious why you even bother carrying E&O?

How big is your E&O trophy?

 

[insurance1822]

All people need to do is follow the rules first....sales second. I see far too many agents doing it the other way around.

I'm not the one trying to circumnavigate the rules --- some people do.

Why carry E&O?

It is morally / ethically responsible
Without it you aren't going to get to do business with many companies

E&O trophy? It is a good claims history and makes my annual premium payer happy.

Not sure why but I detect a bit of snarky??????

It's no different then telling a life insurance applicant to not pound booze the night before his physical. Or by indicating somebody as a non-smoker even if they mention they may have a cigar at their annual golf tournament. If somebody mentions they backed into their own vehicle causing some scuffing that they didn't turn into insurance...are you going to list that on the app as an at-fault with zero pay? It's one thing to blatantly "break" rules & it's another to be realistic.

Fear mongering geezer.

 

[URDRWHO]

Geezer? Now that was nice of you wasn't it?

You do know that legally you don't represent the applicant --- right? You do know that?

Don't pound booze the night before? How about a hit off a spliff?

If an agent hides or misrepresents the facts, they are in breech of their contract. Guess what? Oh he!! I won't say it but you may want to read about E&O and breech.

Here's a headline that can help ---

Insurance Agent Left Bare by Breach of Contract Exclusion in E&O Policy

If you can call me geezer I can call you youngster. Ok? Cool with me if it is cool with you.

Now do you want to hear about this old geezer as the main witness in a suit against Met life. It was in Philadelphia arbitration court. On the Met side you had about 5 > 6 attorney's in their Brooks Brother's suits. I stand with my hand in the air and take the oath. Defense attorney takes my testimony. Met attorney's don't ask one question in rebuttal because they just wanted me to disappear. If you understand anything about the law you understand why the Met attorney's didn't want me to say one more word. Met Life lost. I'm not big on deceptive and improper sales practices.

If you have the chance to sit in court across from a high paid law firm, I suggest you take it. An interesting experience as long as your ducks are walking in a good row. Those insurance companies sure do have high paid attorneys.

On a funny note ---

Just heard a guy using the urine of his wife to pass a urine test. The test came back showing he was pregnant.

But seriously back to the issue at hand. What does the insurance contract say about it?

It's no different then telling a life insurance applicant to not pound booze the night before his physical. Or by indicating somebody as a non-smoker even if they mention they may have a cigar at their annual golf tournament. If somebody mentions they backed into their own vehicle causing some scuffing that they didn't turn into insurance...are you going to list that on the app as an at-fault with zero pay? It's one thing to blatantly "break" rules & it's another to be realistic.

Fear mongering geezer.

 

[VolAgent]

I fail to see how there is a comparison between coaching someone before an exam and intentionally underinsuring the property.

I seriously doubt a company would have a problem with you telling the insured to clean up their property prior to an exam, the same thing as properly preparing for an exam. It isn't going to change the real structure of the risk, but you put a pretty bow on it for the examiner/inspector.

 

[URDRWHO]

Because of the moniker given me (old geezer) am I getting the feeling not everyone agrees with insuring to value.

I fail to see how there is a comparison between coaching someone before an exam and intentionally underinsuring the property.