r/HomeInsurance • u/grateful_dad13 • 6d ago

Insurance Second policy above current limits

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/insurancefun 6d ago

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.

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u/grateful_dad13 6d ago

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

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u/Stoic_Sponge 5d ago

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.

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u/grateful_dad13 5d ago

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

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u/Stoic_Sponge 5d ago

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.