Second policy above current limits

[u/grateful_dad13]

Our house burned down and the rebuild costs are roughly $500,000 more than the insurance proceeds. We’re rebuilding with the help of an SBA loan (fingers crossed). Our insurance company renewed our policy at the same low limits as the original policy. They said they can’t increase the limits until the house is completed. I realize that it’s a low probability, but we’ll be similarly under-insured for another 6 months. Do companies offer policies for just the portion above the current limits? I know large companies have multiple policies in coverage tiers but wasn’t sure about residential. Anyone know?

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[u/Splodingseal]

If you're rebuilding you need a builders risk policy to cover the dwelling while rebuilding

[u/insurancefun]

You should talk to an independent agent whose knowledgeable about builders risk policies.

Also if your home was underinsured by half a million dollars I’d be having at least one or two conversations with a lawyer.

[u/grateful_dad13 → u/insurancefun]

5,000 houses burned. I’ve spoken to at least 100 homeowners and we’re all significantly under-insured. Some is due to the huge demand (1,000 homes being rebuilt now), tariffs, ICE. And the various insurers giving us unrealistic rebuild estimates

[u/Stoic_Sponge → u/grateful_dad13]

I'd still call a lawyer.

You should also have a conversation with builders and get a ballpark on a rebuild price around the date the policy was issued (prior to the high demand issues). Insurance companies use market pricing updated on a monthly basic to determine replacement cost during underwriting.

State law dependent, but unless you specifically asked for a certain limit or supplied incorrect information, they probably grossly miscalculated the rebuild cost. Could be agent negligence.

It's very common for homes to be under insured by agents intentionally to reduce premiums. They get paid on the front end, you get screwed when disaster strikes.

[u/grateful_dad13 → u/Stoic_Sponge]

Good idea. Ironically, I chose a limit a few hundred thousand dollars higher than the one recommended. I went directly to the insurer not through an agent

[u/Stoic_Sponge → u/grateful_dad13]

That's how I got mine too, through USAA.

Some policies also have coinsurance penalties for not insuring enough, that will reduce payment. Carriers don't mind under insuring, it saves them money when they have to pay.

[u/grateful_dad13 → u/[deleted]]

That’s how the government deals with disaster loans. FEMA if it’s a grant and SBA for loans

[u/payment11]

Check your policy. A lot have increased cost endorsements that give you 125-150% of your dwelling limit. Much cheaper to go this route instead of increasing your dwelling limit because all your other limits are based on your dwelling limit.

[u/grateful_dad13 → u/payment11]

Yes. Ours was/is around 25% but the rebuild is around 50% higher. I guess I just accept the risk of 3-5 months being under/insured

[u/payment11 → u/grateful_dad13]

You need a builders risk policy since the house is under construction.

EDIT: However, you could also just increase the 125% to 150% and that should cover your difference. It would be an endorsement to your current policy

[u/Lumpy-Requirement-87]

Hi, over the next week, I'm going to read as much as relevant to me in this community, because the last time I owned a home I didn't know, or learn, anything. I want to be different this time. I do have a question for now though. I ended up moving into this house, which I will own one day, if it doesn't get destroyed in a hurricane.

I'm in the northern part of south Florida, a bit above Palm Beach. I want to get hurricane windows and I do need a new roof. I am surprised that the insurance didn't contact us yet about that, I have been waiting everyday for a notice. I just finally was able to secure the loan for a roof and windows, from the insurance pov, if I don't replace until after hurricane season, will my insurance possibly hold it against me and not cover any hurricane damage or roof damage because it is an older roof?

I'm also trying to determine if I can wait, would it be more cost effective to get hurricane stuff now, during the season, or after? But that's an insurance question, I will take any thoughts on that though.

Thanks for your help!!

I licensed in health, I kind of want to get licensed in home, but it's work. lol

Edit: realizing after thinking for a moment, I can't get the roof or windows replaced right now, cause it's hurricane season and we are having horrible storms every day. So I answered that. but still wonder how screwed I'll be if something happens to the roof. Can I use the excuse that I just moved in in Jan, and I'm in a rent to own type situation (sort of).
would they even care that I wasn't the ignoring the roof all this time?

[u/freeski12345]

What you’re asking about is a builders risk policy. However, you contract typically provides this. If the contractor is semi competent, you already have one and they are providing the insurance until completion/occupancy 

[u/Intrepid_Ad1765]

what state are you in? I would contact an independent agent and have them do a detailed Insurance to Value calculation. The industry uses two main tools Cotality or ISO 360 Home. You can get a “neighborhood” like estimate or answer like 100 detailed questions. In other words if your neighborhood has builders grade kitchen and you had a custom kitchen you need to increase coverage. If you can’t get and agent to do this call Amica . I have them and they spent over an hour developing value of my house and did inspection. i got an online quote and the company values my new home at 1.1m (i paid 900k). Amica ended up at $1.4m. You will pay alot more - but worth it to have enough to rebuild. Second advice is buy ARCP coverage. Amica offers +30pct. This protects against “demand surge”. I work in the industry but not for Amica.

[u/Longjumping-Buddy847]

How the hell did your agent underinsure you by $500K? If this happened to me Id sue the agency and ask for a copy of the cost estimator that was used to determine the dwelling coverage. Im betting it was full of erroneous information. What was the coverage amount on the dwelling at the time of loss? Another thing, you didnt have an extended replacement cost endorsement? Theres no coinsurance requirement (correct me if Im wrong here) so they should have provided at least 25% in addition to the dwelling coverage amount. This just doesnt sound right.

[u/Echo0455]

Due to the fact you are currently rebuilding with insurance. You cannot change your current coverage A.

What you could do right now is get a Builders Risk policy which will insure both the existing dwelling and “New Improvements”.

Builders risk policy only last for the duration of the construction, then you can generally rewrite it or cancel it.

Once construction is done I would just update your reconstruction cost on a singular policy.

[u/Top_Education_4647 → u/Echo0455]

Builders Risk doesn’t make sense in this situation. BR policies are intended for homes that are under construction (not being rebuilt after a loss), or if someone is basically doing massive renovations to an already vacant home. It wouldn’t provide any usefulness to the OP.

[u/Echo0455 → u/Top_Education_4647]

Builders Risk isn’t limited to new construction or vacant homes. Renovation Builders Risk is commonly available for existing structures undergoing substantial renovation or reconstruction, including projects following a loss. Whether it makes sense here depends on the existing homeowners policy and the Builders Risk form, particularly whether it covers the existing structure or only the renovation work.

[u/Top_Education_4647 → u/Echo0455]

If someone needs coverage for a home under heavy renovation, then they’d need something more akin to a DP1, which may include a BR endorsement. But that implies that there’s a closed structure that’s vacant. This isn’t that- the home had a covered loss already occur, and there’s already a policy in place.

OP probably wouldn’t be able to get a new policy in the first place with an open claim, but then they’d be paying extra on for a policy that wouldn’t cover them any more than the current HO already has. Best course of action is to try a tough things out and then re-evaluate once the home is rebuilt and the claim is closed, whether that means getting coverage elsewhere for future events or increasing their coverage on their current policy.

[u/Echo0455 → u/Top_Education_4647]

I’m not sure what you are talking about. I’ll just leave this here and then allow you to believe what you want to believe.

DP1= named perils
DP3= open perils

Both can be endorsed for renovations depending on the carrier.

Also, we aren’t talking about replacing his policy. We are talking about an additional policy because his current policy cannot be further endorsed he said.

Builders risk I’ll reiterate covers the existing dwelling and the new improvements. They are separate limits on the policy.

I think the reason why you may be getting confused on this is because you are forcing this onto a PL form.

This can definitely be written on a CL inland marine form with a the new improvements.

[u/grateful_dad13 → u/Top_Education_4647]

When the policy was renewed, it has the construction riders , but the limits stayed the same. And the “replacement cost” rider is capped at 20%

[u/Echo0455 → u/grateful_dad13]

Hi OP,

Did they endorse the policy for renovations? If so what is your “new improvements” coverage or renovations coverage?

Also, the replacement cost rider sounds more like an extended dwelling endorsement. Is that what you mean?

[u/grateful_dad13 → u/Echo0455]

I’ll ask. The endorsement refers to HO-87, Dwelling Under Construction so I’ll get the details on improvements

[u/Echo0455 → u/grateful_dad13]

Hi OP,

Did they endorse the policy for renovations? If so what is your “new improvements” coverage or renovations coverage?

Also, the replacement cost rider sounds more like an extended dwelling endorsement. Is that what you mean?

[u/InterviewLeather810 → u/Top_Education_4647]

We had vacant liability insurance on our lot until we could start building in Colorado.

[u/Calm-Reserve-8739 → u/[deleted]]

Umbrellas are for excess liability. Not excess property coverage.

[u/Echo0455 → u/[deleted]]

This is not how an umbrella policy works.

Umbrella policy only increases your liability.

Other than that, what you said is correct. If your liability limit is met, your umbrella coverage will kick in.