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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (92769)	10/24/2007 3:19:03 AM
From: 8bits	Read Replies (1) \| Respond to of 306849

OK, what you say makes sense as far as the payoff goes... but when people come up with a figure to insure, it is based on the replacement cost of the structure, not the land, correct? so if the house costs $800K but the estimated rebuilding cost is only $200K (probably quite generous for a 1200sf house), won't they typically only insure it for $200K? that is the way it works in TX, as far as i know... That's the same with my insurance policy in Cal... in fact they wouldn't had me the money if my duplex burned down... they would hire contractors to build a structure of the same size and with the same or similar features. (Tiled bathrooms, kitchen, hardwood floors..etc...)

To: Wyätt Gwyön who wrote (92769)	10/24/2007 7:42:58 AM
From: carranza2	Read Replies (1) \| Respond to of 306849

Right, structure only. Most policies exclude damage to land, i.e., sinkholes are not covered. The Valued Policy Law essentially enforces a market driven response, i.e., the valuation is a result of a negotiation, at least in theory. You therefore don't see too much deviation from the cost to replace new for old. So, yes, the example I used is probably an extreme, but there will be a few of those. In a mass disaster, this cost will of course go up. If the stx is not a total loss, and the policy calls for replacement value payments, the loss could become total if the estimates are jacked up due to higher post-disaster replacement expenses.