My house is getting more valuable by the day. So much so that I’m almost afraid to open the mail to find out how much.
The mail recently included a letter from my insurer announcing that it had determined that, if anything happened to my house, it would cost $342,000 to replace it.
At first it was as if Ed McMahon rang the bell and said I’d won $1 million. The joy was brief. Then I checked the name and address on the envelope. They were mine.
I reread the letter. Yes, someone had indeed called me and questioned me about the house. As I recall the conversation, I replied yes to questions about a garbage disposal and a porch.
Somehow during that conversation, however, my 1,300-square-foot twin had more than doubled in size–to 2,700 square feet.
“The cost to rebuild a home can be significantly higher than the cost of new construction,” the letter said. “It can even be higher than the cost that the home would currently sell for.”
Tell me about it. I had my real estate agent take CPR so she could revive me if I ever make a profit on a house sale.
While I acknowledge that my house was underinsured–67 percent of all American homes are, according to National Underwriter, an industry journal–$342,000 for a 1,300-square-foot house was out of line. And because the extra insurance coverage would add $1,100 to my annual bill, it was definitely out of line with my wallet.
A seven-minute call to an 800 number cleared up the problem. It indeed had been a failure to communicate. The square-footage was reduced, and my replacement value was decreased accordingly. My annual insurance bill will rise only $400.
So far, I’ve fared better than a caller with the same insurer. She challenged her $380,000 replacement bill, and while the company did chip away some of that, it was unwilling to drop coverage on the caller’s “outbuildings” that the insurer had listed on the notice.
The caller has no outbuildings, but, according to the formula the insurer is using to calculate replacement value, the outbuildings are there, even if they aren’t.
Insurance is one of life’s little mysteries.
Two years ago, a neighbor’s insurer notified him that if he did not repair the stretch of sidewalk in front of his house within 90 days, they would drop his coverage.
The new sidewalk cost $1,000. It’s the nicest one on the street.
About the same time, another homeowner 10 blocks away got the same notice from the same insurer. She called the Pennsylvania Insurance Department, which halted the insurer’s action for 90 days and ordered the insurer to examine the sidewalk.
The verdict: a $3.19 tube of concrete caulk.
Neither had ever made a claim on their homeowners’ policies.
My neighbor didn’t challenge. In his defense, I’ll agree that the insurer’s contention seemed plausible. The sidewalk was cracked in places–sodium chloride does marvelous things to concrete in the winter. Still, he was uncomfortable and should have challenged. But who has the time?
While I don’t wish to appear to be siding with the insurance companies, they are apparently concerned with the growing tendency of Americans to sue at the drop of a hat. A major source of these lawsuits is people tripping over a broken sidewalk–and $1 million and court costs later, the homeowner and the insurer are out a bundle.
And, while I have boundless faith in humanity, some of these lawsuits probably are bogus. For proof, all one needs to do is wait for the next transit accident and ask yourself how 1,000 people can fit on a bus.
Still, it would have been nice if the insurance company had inspected the sidewalks firsthand. Now there are two more people who are suspicious of insurers.
Other than switching to calcium chloride to melt the ice in winter, what have we learned from this?
First, the insurance companies learned a valuable lesson from Hurricanes Andrew and Hugo that they are attempting–ineptly sometimes–to pass along to us: Our houses might not have insurance enough to protect our investment in the event of catastrophe.
Most people have adequate insurance to protect the mortgage lender’s investment, but not enough to protect their own investment.
Most houses are insured to the amount of the mortgage and little more. If disaster strikes, we need to have enough money to rebuild our lives.
The second is to question decisions that seem to be wrong. Even in this litigious society, most of us tend to shrink from confrontation, even when we know we’re right.
The call I made to my insurance company took seven minutes, and I saved $700. That’s a hundred bucks a minute. That’s a good day’s pay.
