Insurance Company has revalued my property without explanation

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Insurance Company has revalued my property without explanation

Mike Girard
Investor · Philadelphia, PA · Member since 2015 · 81 posts · 7 votes

I already posted this but I fear I overexplained. 

I recently got a notice that because of "certain features" the insurance company's inspector found when giving my property the once-over, the valuation of my fairly standard, one hundred year old Philly row house has gone from the figure given by every agent -- 300,000 -- to 440,000. The company, Nationwide, is intent on raising my premium and charging me retroactively for the three months of insurance I've had so far. My house is 1989 square feet in a city where construction of row houses costs about 125 per square foot. 

I'm stunned that they can do this without any explanation of what "features" provoked this revaluation. The only thing separating me from the other houses on the same street is a little smoker's balcony.  The house has none of the original detail as far as I can tell, apart from some small marble bits here and there. Nationwide has, incredibly, tasked the receptionist in the local office with all direct communication about this and other really weighty matters. No one with any discretion has said a word, including my local agent, and I wouldn't even know this were happening yet had I not requested a copy of the letter informing me of this which is scheduled to be sent on 12/7.

What, if anything, can I do about this. Seems to me I should have the right at least to a detailed, written rationale for the dramatic revaluation. 

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  • Mark Creason
    Real Estate Lender and Broker · Dallas, TX · Member since 2013 · 966 posts · 500 votes
    10y

    Mike,

    Your insurance should be covering what it would cost to rebuild in your area.  It would also include the cost to demo and remove the existing improvements.  Does the valuation seem high?  They are asking for over 200 a sf to rebuild.  I would ask them for an explanation and you can always take your business somewhere else.  Nationwide would owe you a refund on the portion unused.

    Mark

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  • Carrie Hiner
    Real Estate Agent · Austin, TX · Member since 2015 · 181 posts · 75 votes
    10y

    Can you get another quote from a different Insurance Company? I'd shop around.  

    That aside, my rates go up every year. : ( 

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  • Timothy W.
    Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes
    10y

    It's likely the difference between a market price valuation and a replacement cost valuation.  I fought my home replace cost valuation that was about 80,000 higher than what I paid for it, which is what I anticipated because I bought it right, but I believed it was still too high.  I was able to knock it down about 40,000.  Granted, with my background I was able to establish that I had more credentials than they did in preparing my replacement cost valuation.

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  • Mike Girard
    OP
    Investor · Philadelphia, PA · Member since 2015 · 81 posts · 7 votes
    10y
    Originally posted by @Timothy W.:

    It's likely the difference between a market price valuation and a replacement cost valuation.  

    I realize that this valuation has nothing to do with the market price, which after renovations, is going to be 250k at best. I am talking about the high end of new rowhouse builds in Philly -- about $125 per square foot -- and the replacement value they've assigned to my property -- without any explanation at all -- that is $100 per square foot more than that average. 

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  • Mike Girard
    OP
    Investor · Philadelphia, PA · Member since 2015 · 81 posts · 7 votes
    10y
    Originally posted by @Carrie Hiner:

    Can you get another quote from a different Insurance Company? I'd shop around.  

    I'd like to, but I'm afraid this incident with Nationwide, which, by the way, comes complete with a threat to cancel on purely trumped up grounds, will blackball me for anything but really high rates. I just want Nationwide to justify the hike. What kind of business operates like this?

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  • Mike Girard
    OP
    Investor · Philadelphia, PA · Member since 2015 · 81 posts · 7 votes
    10y

    For all Philly readers, I'm shopping for a new agent. Hit me up if you know anyone. Also welcome recommendations for decent, inexpensive insurance. 

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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    10y

    Is it brick or stone?  That is what increases our replacement cost significantly.   

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  • Mike Girard
    OP
    Investor · Philadelphia, PA · Member since 2015 · 81 posts · 7 votes
    10y
    Originally posted by @Colleen F.:

    Is it brick or stone?  That is what increases our replacement cost significantly.   

     It's brick, like all the old row houses in South Philly. My insurance agent, who's located in Philly knew this when he did the original valuation, as did all the other bidders who, likely using the same software, came up with the same 300k figure just a few months ago. If Nationwide can justify this, I'll likely comply. But the fact that this has come up almost two months after Nationwide's inspection, that only their receptionist will speak to me and my agent is incognito suggests a money grab is in play. 

    Also, why am I obliged to insure a property for more than I will happily take on the off chance it's completely destroyed? The cost of buying a similar house in the same neighborhood is all I'd require, and I'd prefer another old row house to a new one anyway. Three hundred thousand is plenty for that. Almost nothing in this neighborhood sells for more than 225k at the moment. 

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  • Kevin Delaney
    Investor · Feasterville Trevose, PA · Member since 2015 · 107 posts · 31 votes
    10y

    I thought it was only mandatory to carry enough to cover the mortgage.  How can the insurance company force you to carry higher coverage?  Sounds shady to me.  Maybe they are hoping you will quietly pay the higher rate.

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  • Timothy W.
    Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes
    10y

    Who is giving you the 125 per square foot cost of construction figure for a brick structure?  I bet you could pay a GC to give you a replacement cost valuation.  I would have a hard time explaining why an insurance inspector's valuation should trump a GC's.  They don't even have the same credentials as an adjuster, much less a GC.

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  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    10y
    Originally posted by @Mike Girard:

    For all Philly readers, I'm shopping for a new agent. Hit me up if you know anyone. Also welcome recommendations for decent, inexpensive insurance. 

    Try the following:

    Look for an Erie Insurance agent

    Look up Liberty Insurance Brokers (tell Andy Shamberg I sent you) - you might end up in a "surplus lines" coverage here

    Look up the company in the profile of 

    @Tim Norris

    Look up the info in this post:

    https://www.biggerpockets.com/forums/521/topics/23...

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  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    10y
    Originally posted by @Mike Girard:
    Originally posted by @Colleen F.:

    Is it brick or stone?  That is what increases our replacement cost significantly.   

    ...

    Also, why am I obliged to insure a property for more than I will happily take on the off chance it's completely destroyed? The cost of buying a similar house in the same neighborhood is all I'd require, and I'd prefer another old row house to a new one anyway. Three hundred thousand is plenty for that. Almost nothing in this neighborhood sells for more than 225k at the moment. 

    Then it sounds like you want actual cash value (ACV) coverage rather replacement cost value (RCV) - but you might not realize that there could be more to this, such as demolition and clean up costs. 

    There is also the notion of "co-insurance" which comes into play when the value for which you have insured is too low; search the forums for other threads where co-insurance is discussed by insurance pros (I'm not one of those types of pro).

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  • Mike Girard
    OP
    Investor · Philadelphia, PA · Member since 2015 · 81 posts · 7 votes
    10y
    Originally posted by @Steve Babiak:
    Originally posted by @Mike Girard:

    For all Philly readers, I'm shopping for a new agent. Hit me up if you know anyone. Also welcome recommendations for decent, inexpensive insurance. 

    Try the following:

    Look for an Erie Insurance agent

    Look up Liberty Insurance Brokers (tell Andy Shamberg I sent you) - you might end up in a "surplus lines" coverage here

    Look up the company in the profile of 

    @Tim Norris

    Look up the info in this post:

    https://www.biggerpockets.com/forums/521/topics/23...

    Thanks!

    0Reply
  • Justin R.
    Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes
    10y
    Mike Girard FWIW, my insurance company has re-inspected every property I've held for any significant length of time. I've agreed with the replacement cost sometimes, and not others. I've had no problem simply telling them, "That's nice that you think a rebuild would cost $X00,000. I know it will only cost $Y00,000, and so I'm only interested in purchasing insurance for that amount." Done.
    0Reply
  • Mike Girard
    OP
    Investor · Philadelphia, PA · Member since 2015 · 81 posts · 7 votes
    10y
    Originally posted by @Justin R.:

    Mike Girard FWIW, my insurance company has re-inspected every property I've held for any significant length of time. I've agreed with the replacement cost sometimes, and not others.

    I've had no problem simply telling them, "That's nice that you think a rebuild would cost $X00,000. I know it will only cost $Y00,000, and so I'm only interested in purchasing insurance for that amount." Done.

     That's great. They communicate this stuff as if it's something you have to do and I just go along. When I bought the policy I was not given any choice between replacement value and market value. The Nationwide price I have is quite reasonable (relatively speaking), and while I dislike the way this is playing out, I'd prefer to stay with them in the end. 

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    I know in commercial when a initial policy is written it is a quote of XX. Then the insurance company eventually sends out an inspector sometimes after closing and something undiscovered previously is found the rate can change.

    It sounds like maybe they wrote your policy based on an average and then a physical inspection turned up something that altered the terms and pricing of the policy. Your are correct that they should provide this information.

    I am not an insurance expert so no legal advice given.

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  • Mike Girard
    OP
    Investor · Philadelphia, PA · Member since 2015 · 81 posts · 7 votes
    10y
    Originally posted by @Joel Owens:

    I know in commercial when a initial policy is written it is a quote of XX. Then the insurance company eventually sends out an inspector sometimes after closing and something undiscovered previously is found the rate can change.

    It sounds like maybe they wrote your policy based on an average and then a physical inspection turned up something that altered the terms and pricing of the policy. Your are correct that they should provide this information.

    I am not an insurance expert so no legal advice given.

     Yes, you've described exactly what happened. But in the absence of a rationale, and in light of how this comes almost two months after the routine inspection and how the only person communicating with me about this is the local Nationwide office's receptionist, it seems like someone needs to resolve some end-of-year shortfalls. It doesn't pass the smell test. Not at all. 

    I think the best course is to follow the advice above and tell them what amount I want to insure the property for. 

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  • Jason Eyerly
    Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes
    10y
    Originally posted by @Mike Girard:
    Originally posted by @Justin R.:

    Mike Girard FWIW, my insurance company has re-inspected every property I've held for any significant length of time. I've agreed with the replacement cost sometimes, and not others.

    I've had no problem simply telling them, "That's nice that you think a rebuild would cost $X00,000. I know it will only cost $Y00,000, and so I'm only interested in purchasing insurance for that amount." Done.

     That's great. They communicate this stuff as if it's something you have to do and I just go along. When I bought the policy I was not given any choice between replacement value and market value. The Nationwide price I have is quite reasonable (relatively speaking), and while I dislike the way this is playing out, I'd prefer to stay with them in the end. 

     History doesn't repeat itself, but it often rhymes. If they tried to screw you over with some shady maneuver I wouldn't put it above them to try it again down the line. I personally like to use professionals that I don't have to inspect and advise on how to do their jobs. While you do like Nationwide, I'd think you'd be better off going elsewhere. 

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  • Mike Girard
    OP
    Investor · Philadelphia, PA · Member since 2015 · 81 posts · 7 votes
    10y
    Originally posted by @Jason Eyerly:
    Originally posted by @Mike Girard:
    Originally posted by @Justin R.:

    Mike Girard FWIW, my insurance company has re-inspected every property I've held for any significant length of time. I've agreed with the replacement cost sometimes, and not others.

    I've had no problem simply telling them, "That's nice that you think a rebuild would cost $X00,000. I know it will only cost $Y00,000, and so I'm only interested in purchasing insurance for that amount." Done.

     That's great. They communicate this stuff as if it's something you have to do and I just go along. When I bought the policy I was not given any choice between replacement value and market value. The Nationwide price I have is quite reasonable (relatively speaking), and while I dislike the way this is playing out, I'd prefer to stay with them in the end. 

     History doesn't repeat itself, but it often rhymes. If they tried to screw you over with some shady maneuver I wouldn't put it above them to try it again down the line. I personally like to use professionals that I don't have to inspect and advise on how to do their jobs. While you do like Nationwide, I'd think you'd be better off going elsewhere. 

     Yeah, you're probably right. I just hate doing things over and I just think insurance is a racket anyway. But some rackets are worse than others. I wonder if it's just my local office that's screwed up. 

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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    10y

    It is likely the brick construction has something to do with it but it isn't a good sign that they won't talk to you about why it is higher, imagine if you have a claim how they will act. Our building is stone  I explained that we were unlikely to rebuild in granite if the place burned down and they got into how the biggest issue being a repair vs replacement and that it is more costly. That being said you may want to try someone else as down the road we found an insurer who initially would not quote a policy for us. 

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  • Mike Girard
    OP
    Investor · Philadelphia, PA · Member since 2015 · 81 posts · 7 votes
    10y
    Originally posted by @Colleen F.:

    It is likely the brick construction has something to do with it but it isn't a good sign that they won't talk to you about why it is higher, imagine if you have a claim how they will act. Our building is stone  I explained that we were unlikely to rebuild in granite if the place burned down and they got into how the biggest issue being a repair vs replacement and that it is more costly. That being said you may want to try someone else as down the road we found an insurer who initially would not quote a policy for us. 

     They knew it was brick from Day 1 and the agent who wrote the policy lives in Philly and knows what these row houses are like. No doubt he insures such houses all the time. Whatever the newly discovered "features" are that raise the value above the original assessment, they don't include brick. That they're doing this entirely without an open line of communication apart from a receptionist who freely admits she knows nothing, leaves me disinclined to assume that there's a good reason for it apart from end-of-year ledger balancing. 

    Like you and others have said, this doesn't bode well for future engagements, so starting Monday, I will be shopping for another insurer. 

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