My insurance decision? Am I missing something?

Question

I'm currently at a reliable/well-known insurance company.
My agent is very good and my coverage is pretty decent.
My deductible is 1,000 and I'm at replacement cost with
some pretty significant amounts above what I actually owe.

The being said, my rates have really gone up considerably in
the last year. I was paying $500 to 700 a year and I now seem
to be getting rates from $700 to 1,000.

My biggest problem is the replacement costs are out of whack.
A house I bought last year has a replacement cost value of 250k.
I am all in 88k.   I really see no reason to use insurance as
a lottery ticket. And my real estate company can't lower replacement
cost to what I want.

I just want to make sure I can pay off my mortgage and have about
10k to 20k to take care of the lot.  But I also want to make sure
if I have any small to medium claims, I'm not coming out of pocket.

Found another insurance company - from a lead on here - that 
has cheaper coverage because they'll let me drop my replacement
coverage amounts to something more reasonable.

It should save me about $300 a month (currently paying about 1k a month).

They make it real easy to add houses and cover houses that are vacant
and/or need rehab which will be convenient for my hard money lender requirement.

Am I missing something? Is there a risk in not having the actual replacement cost to rebuild the house? I know that I could get a windfall if 
a house would actually have a complete loss event but is that really
where I want my $300 a month going? Waiting for that to happen?

The other big downside to switching is that the deductible on
the new plan is 3k and thats as low as they'll go. The deductible
on my current plan is 1k.

I've only had one claim in the 4 or 5 years I've been doing this and
have 15 total houses. So I'm not sure the deductible is really a big issue.

But it does mean I may end up coming out of pocket a little if I had
a small fire or some wind damage.

If you could help clear some of these options up, it would be much appreciated.
I'm leaning toward the new carrier because of the ease to adding properties
and the monthly price savings. I'm still insured in case significant damage occurs. But if its something minor, a 5 or 6k repair, its going to cost me $3k versus 1k with state farm.

Then again, 4 or 5 years with 1 claim, the 3,600 a year I save will cover the the extra 2k in deductible.

Andrew Jones · Answer

I agree raise the deductible mine are 10k. I think of insurance only to help me in the case of a total loss.

Mike H. · Answer

Thanks. I just want to make sure there wouldn't be any gotchas with lower my replacement value amounts to numbers that wouldn't allow me to rebuild.

I did make sure that the policy was replacement cost though so that if I had a fire and it cost me 20k to fix, they would pay 20k minus deductible and not ding me on giving me 50% of value of cabinets, etc.

I also am going to make sure that my replacement value covers the mortgage plus another 15k to cover site cleanup to get the lot back to code.

What I'm trying to get out of is paying to cover the windfall for the houses (i.e. 250k in coverage for a house I only owe 88k on). If I can save $300 a month doing that, I think it sounds like I'm on the right track.

thanks again,  I'm going to move my stuff over to this agency as the policies lapse. If anybody has any other words of wisdom, though please share.  If there's a reason I should keep the "windfall" coverage on my properties that my current agency requires, I'd like to know before I convert too many of these over. :-)

Bruce M. · Answer

Andrew,  Where can you find a market to offer a 10K deductible?  I have never been able to find a company willing to write 10K.  Thanks.

Bruce M. · Answer

Mike,

I think replacement cost is much more important to have than ACV.

On the savings, If you save $300 a year but your deductible goes up from 1K to 3K, it may not be a bad deal.  If you have a claim under 3K, I frankly would not even report it if it was me.  Insurance companies raise rates now a days even on the smaller claims as they are all tracked.  If you change carriers, they all want to see prior loss runs for the last five years too.

I think I know the broker you talked to that was mentioned on another post in here.  I talked to him too and they seem to offer a decent program, even with the higher deducible.  If you plan on having lots of properties in different states, having one broker to go is nice too.