home insurance dwelling coverage limits ?

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I have currently my home insurance for dwelling with limit of
370K. Insurance company’s estimate to rebuild the house is 230K. According to them I am over-insuring myself. However, my mortgage company wants me to keep the insurance upto or higher than loan amount. Why would they want that ? And if I keep ( in confidence with the mortgage company) lower amount what complications in future can happen?

6 Comments
  1. Reply
    BMW BFD
    June 26, 2011 at 8:51 am

    did you provide the insurance company with all information on your home? They do rebuild based on all criteria on your home, including if you have a bathroom that is nice, bay windows, what kind and how old the roof is…stuff like that. contact your agent to discuss what options you have on your home and how they are coming up with a rebuild amount that is lower than what your loan says.

  2. Reply
    mei-lin
    June 26, 2011 at 9:46 am

    does the value include the land? If so, talk to your mortgage company and see if that amount can be deducted and then talk to your insurance agent. Also, make sure the ins agent knows any upgrades that have been done to your home.

  3. Reply
    JayJay
    June 26, 2011 at 10:15 am

    Remember, your mortgage amount also includes the price of the land and infrastructure. To rebuild your home would not include those costs. Your mortgage company has every right to request that you have homeowners insurance that covers 100% of your outstanding principle.

  4. Reply
    mbrcatz17
    June 26, 2011 at 10:43 am

    Well, the mortgage company is stupid. They think someone can steal the land, or the land can burn down. They want to “insure” the value of the loan. But that’s not what the policy covers.

    But the fact of the matter is, the insurance company will NEVER pay out more than it costs to rebuild the home. Keep in mind, these are the same people that require “hazard” insurance, which is not technically a real term anywhere outside the mortgage industry.

    I would talk to a manager at the mortgage company, OR ASK YOUR AGENT TO DO THIS, and negotiate the value down, maybe not all the way to $ 230K, but maybe $ 250 or $ 270. Get the insurance company to put in writing, that this is 100% of the estimated replacement value of the dwelling. Get a “guaranteed replacement cost” endorsement on the policy.

    Your agent should be able to pull off the change; but not with the first person who answers the phone – a manager type person will have to approve it.

  5. Reply
    fr_chuck
    June 26, 2011 at 11:06 am

    you have no optoin than to carry an amount equal to the mortage. Next if your house is only worth 230 K, what is your mortage ?

    And basicly if you don’t do what they mortage company says, they can go out and buy the coverage at higher rates and merley change you for it, or they can claim your mortage is in default and call for payment in full.

    But the actual loan documents should state at what level your insurance has to be at.

  6. Reply
    kirsten h
    June 26, 2011 at 11:49 am

    your loan amount probably includes the land. you cannot insure land. if the loan amt does NOT include the land then the mtg co can make you carry enough to insure the loan. here is where the problem is. if the home is valued at 230,00 replacement cost, if the home was destroyed the ins co is not going to pay you 370,000 to satisfy the mtg co. they will pay you what it costs to rebuild that house in todays market. talk to your agent and make sure that they have done a current cost replacement on the home and have ALL info on the home. You obviously do not want to pay for more ins than you need, and don’t want to underinsure the home either. Try calling another company for a quote and see what they come up with on the replacement value. If there is a big difference from what your agent got, you may want to consider moving your insurance!

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