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Renegotiation of your insurances


beerbaron
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As everybody know we are probably at the rock bottom of the P&C soft market. Did anybody on the board recently renegotiated all their insurances in order to take advantage of the low prices available? What was your average saving in %? Seems to me like a value play on the other side of the equation :)

 

BeerBaron

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As everybody know we are probably at the rock bottom of the P&C soft market. Did anybody on the board recently renegotiated all their insurances in order to take advantage of the low prices available? What was your average saving in %? Seems to me like a value play on the other side of the equation :)

 

BeerBaron

 

Bought a cottage near the beach a few years ago.  Inherited an insurance policy that was for much more than full replacement value because real estate was pricey.  Recently, got the insurance company to cut the maximum coverage in half, but the reduced limit still covers full replacement value.  Now, we are paying a premium that's less than two thirds of what we had been paying.  :)

 

 

Renegotiation of coverage limits to lower insurance rates for new or nearly new houses purchased in recent  years at inflated prices may cut your bill because construction costs are much lower now than a few years ago. Older houses may also be overinsured because most insurance companies raise coverage limits annually on existing policies to cover the usual inflation in construction costs during most years.

 

 Premium payments increase when coverage limits are raised.  But insurance companies don't automatically lower coverage limits when construction costs decline.  When calculating replacement costs, don't be fooled by use of the term: full replacement value.  Realize that a prepared site and the foundation will remain after a total loss from fire and most calamities. Therefore, rebuilding costs will be less than the cost of building a newly developed house.  Sometimes, insurance companies will ignore the fact that rebuilding is almost always cheaper than developing a lot and building a house from scratch.  Insurance companies like to have houses overinsured because they get paid extra for a percentage of coverage they'll never have to pay on a claim.

 

When negotiating with your insurance company, bear in mind that the formula that they use to calculate replacement value is probably inflated with a replacement construction cost per square foot that is outdated in a depressed market.  Be prepared to cite examples of current construction costs to convince your agent that your house could be completely rebuilt for less than the maximum value on your current policy.  :)

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