\”I wish I had a $ for every time I\’ve tried to explain the difference between market value and replacement cost, and the need to insure to value (both HO\’s and flood).\”
Can you explain this to me? I am going to see my agent tomorrow and I would like to know more so I can keep her on her toes! If it is too long for you to post, I understand.
Replacement cost is simply the cost to rebuild the building as it stands, or the cost to replace contents with items of like kind and quality.
Market value is what it would sell for on the open market. For this you have to separate out the market value of the land so you have only the market value of the building, extremely difficult to do, most appraisers don\’t have a clue.
You insure on the replacement cost basis. Market value has nothing to do with property insurance.
Added issue is the cost to bring up to current code. Houses down here (S Fl) built in the 70\’s through the late 90\’s) fall woefully short of the current code. It can cost a fortune to upgrade them. That\’s why Andrew and Wilma did so much damage.
Standard replacement cost definition does not include cost to upgrade (although Fl. law requires homeowner\’s policy to include additional 25% of building value for cost to upgrade) so it\’s a big issue for commercial buildings.
\”I wish I had a $ for every time I\’ve tried to explain the difference between market value and replacement cost, and the need to insure to value (both HO\’s and flood).\”
Thank you for the information. I think I was confused because you talked about market value vs. replacement cost and then said the home should be insured to value (I thought you were talking about market value which didn\’t make any sense to me). I see now what you meant… I am glad I asked you to clarify instead of just assuming and biting your head off. It\’s just polite, right?
As for the rest of it, that makes sense to me which is why I am going to see my agent tomorrow. I think I am underinsured based on replacement cost. I have been seeing $125 per sq. ft., etc. for rebuilding. My home is only insured approx. $100 per sq. ft. As far as land is concerned, they don\’t give you much nowadays in Florida huh? :) I doubt my land is worth much… I am more looking to ensure I have enough for \”replacement cost\” since my market value is much higher even without the land value.
With regards to cost to rebuild, how does one take into account a garage which I would think is less costly to rebuild (per sq. foot)?
Again, I appreciate the clarification and helpful information!
no response to the truth. State Farm lost. Their policy found to be unenforceable. I just tried to explain to you why they lost and that they should have known they would lose and you went beserk. TOOOOO bad you lose. State Fram lost and there is a pattern of abuse by State Farm in both Okla and Miss.
you appear to be abit overstimulated this morning;
hate to burst your bubble, but just because the courts agree with your point of view doesn\’t make you right…
good case in point:
OJ trial:
not guilty of criminal charge
responsible of civil charge
we\’ve seen courts get it wrong on both sides. Frankly, I don\’t know why anyone would chance a LA judge and/or jury; their system is completely skewed against the carrier.
I\’m not surprised in the least with the court decisions; consider where you are to find a juror who knows nothing of the subject, who doesn\’t have an opinion; and the judges who are often held to be impartial, but depend on popular appointment and elections from voters who are less than impartial (and typically uninformed/misinformed).
I\’ve seen many a judge and jury get it wrong in these venues long before Katrina. I see absolutely no reason to expect them to get educated after seeing their coast washed away. Sorry, defendants just don\’t get a fair shake in these regions.
I am disappointed in your response. Your posts are usually more reasoned than this one. You obviously know that the burden of proof in a civil case vs a criminal case are significantly different as well as the vote in the jury being different.
The facts are State Farm has been found to be wreckless in their disregard for the homeowners, hence punative damages. An arguable case would not have had punative damages awarded. They also got hit in OKLA for the same tricks with engineers, including punative damages. There is a pattern of abuse with State Farm. I have personally handled claims as far back as 1994 where we paid the wind damage even though the only thing remaining was a slab. State Farm knew they would lose but figured it was worth a shot, showing total disregard for their insureds. Finally my discusion has really been more about Mississippi than Louisiana (even though this as under a LA case article) and the cases handed down in Mississippi were by a federal judge, who is more insulated from politics than an elected state judge.
encountered anyone as stupid as Jewel in my entire life. Please refrain from posting your ignorance anymore. You are now oficially on my ignore button.
The homeowners policy requires you to insure to at least 80% of the replacement cost to avoid payment penalty for underinsurance.
Some, for instance my Hartford policy, if you insure to 100% of their estimated replacement value, will then pay up to 125% of that value giving you a nice cushion for inflation.
Yes, garages, being unfinished, have a replacement cost far less than the house itself.
It is actually worthwhile to have the house appraised, for $250 to $350. But, be sure you get an appraiser who knows how to do current replacement cost, otherwise he will do market value of building + land then subtract market value of land to give you market value of house, which is not cost to rebuild, but he will tell you it is. Plus market value of land is a swag anyway.
Far to many appraisers don\’t really know what they are doing.
The cases are all there in both Mississsippi and OKLA. State Farm received punitive (incorrctly spelled in last post) damages in both states for \”doctoring\” engineer reports. Also, it is common insurance practice to pay for wind damage on slab cases. Ask an adjuster you know that handled claims in Opal in 1994 or for other than State Farm or Nationwide in Katrina. Judges do not allow punitive damages on just any case, no matter how political. State Farm hit with punitive in OKLA and Miss. Ask any defense attorney you know how much case law there is agianst the insurance industry where State Farm picked the wrong battle. BTW, Alabama is more corrupt than Louisiana. Not saying Louisiana is not a tough venue but, Alabama is worse.
I have never heard of any appraiser using marklet value for RC. I completed appraiser\’s school ( 80Hrs appraisal and 15 hrs USPAP) and we were taught to use the cost approach only for RC. All appraisers I ever worked with ignored the cost approach, but never confused it with market value. I have never heard of an appraiser ever being hired for cost approach only.
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\”I wish I had a $ for every time I\’ve tried to explain the difference between market value and replacement cost, and the need to insure to value (both HO\’s and flood).\”
Can you explain this to me? I am going to see my agent tomorrow and I would like to know more so I can keep her on her toes! If it is too long for you to post, I understand.
Thanks! :)
Replacement cost is simply the cost to rebuild the building as it stands, or the cost to replace contents with items of like kind and quality.
Market value is what it would sell for on the open market. For this you have to separate out the market value of the land so you have only the market value of the building, extremely difficult to do, most appraisers don\’t have a clue.
You insure on the replacement cost basis. Market value has nothing to do with property insurance.
Added issue is the cost to bring up to current code. Houses down here (S Fl) built in the 70\’s through the late 90\’s) fall woefully short of the current code. It can cost a fortune to upgrade them. That\’s why Andrew and Wilma did so much damage.
Standard replacement cost definition does not include cost to upgrade (although Fl. law requires homeowner\’s policy to include additional 25% of building value for cost to upgrade) so it\’s a big issue for commercial buildings.
\”I wish I had a $ for every time I\’ve tried to explain the difference between market value and replacement cost, and the need to insure to value (both HO\’s and flood).\”
Thank you for the information. I think I was confused because you talked about market value vs. replacement cost and then said the home should be insured to value (I thought you were talking about market value which didn\’t make any sense to me). I see now what you meant… I am glad I asked you to clarify instead of just assuming and biting your head off. It\’s just polite, right?
As for the rest of it, that makes sense to me which is why I am going to see my agent tomorrow. I think I am underinsured based on replacement cost. I have been seeing $125 per sq. ft., etc. for rebuilding. My home is only insured approx. $100 per sq. ft. As far as land is concerned, they don\’t give you much nowadays in Florida huh? :) I doubt my land is worth much… I am more looking to ensure I have enough for \”replacement cost\” since my market value is much higher even without the land value.
With regards to cost to rebuild, how does one take into account a garage which I would think is less costly to rebuild (per sq. foot)?
Again, I appreciate the clarification and helpful information!
no response to the truth. State Farm lost. Their policy found to be unenforceable. I just tried to explain to you why they lost and that they should have known they would lose and you went beserk. TOOOOO bad you lose. State Fram lost and there is a pattern of abuse by State Farm in both Okla and Miss.
you appear to be abit overstimulated this morning;
hate to burst your bubble, but just because the courts agree with your point of view doesn\’t make you right…
good case in point:
OJ trial:
not guilty of criminal charge
responsible of civil charge
we\’ve seen courts get it wrong on both sides. Frankly, I don\’t know why anyone would chance a LA judge and/or jury; their system is completely skewed against the carrier.
I\’m not surprised in the least with the court decisions; consider where you are to find a juror who knows nothing of the subject, who doesn\’t have an opinion; and the judges who are often held to be impartial, but depend on popular appointment and elections from voters who are less than impartial (and typically uninformed/misinformed).
I\’ve seen many a judge and jury get it wrong in these venues long before Katrina. I see absolutely no reason to expect them to get educated after seeing their coast washed away. Sorry, defendants just don\’t get a fair shake in these regions.
Chad:
I am disappointed in your response. Your posts are usually more reasoned than this one. You obviously know that the burden of proof in a civil case vs a criminal case are significantly different as well as the vote in the jury being different.
The facts are State Farm has been found to be wreckless in their disregard for the homeowners, hence punative damages. An arguable case would not have had punative damages awarded. They also got hit in OKLA for the same tricks with engineers, including punative damages. There is a pattern of abuse with State Farm. I have personally handled claims as far back as 1994 where we paid the wind damage even though the only thing remaining was a slab. State Farm knew they would lose but figured it was worth a shot, showing total disregard for their insureds. Finally my discusion has really been more about Mississippi than Louisiana (even though this as under a LA case article) and the cases handed down in Mississippi were by a federal judge, who is more insulated from politics than an elected state judge.
encountered anyone as stupid as Jewel in my entire life. Please refrain from posting your ignorance anymore. You are now oficially on my ignore button.
The homeowners policy requires you to insure to at least 80% of the replacement cost to avoid payment penalty for underinsurance.
Some, for instance my Hartford policy, if you insure to 100% of their estimated replacement value, will then pay up to 125% of that value giving you a nice cushion for inflation.
Yes, garages, being unfinished, have a replacement cost far less than the house itself.
It is actually worthwhile to have the house appraised, for $250 to $350. But, be sure you get an appraiser who knows how to do current replacement cost, otherwise he will do market value of building + land then subtract market value of land to give you market value of house, which is not cost to rebuild, but he will tell you it is. Plus market value of land is a swag anyway.
Far to many appraisers don\’t really know what they are doing.
The cases are all there in both Mississsippi and OKLA. State Farm received punitive (incorrctly spelled in last post) damages in both states for \”doctoring\” engineer reports. Also, it is common insurance practice to pay for wind damage on slab cases. Ask an adjuster you know that handled claims in Opal in 1994 or for other than State Farm or Nationwide in Katrina. Judges do not allow punitive damages on just any case, no matter how political. State Farm hit with punitive in OKLA and Miss. Ask any defense attorney you know how much case law there is agianst the insurance industry where State Farm picked the wrong battle. BTW, Alabama is more corrupt than Louisiana. Not saying Louisiana is not a tough venue but, Alabama is worse.
Temblor:
I have never heard of any appraiser using marklet value for RC. I completed appraiser\’s school ( 80Hrs appraisal and 15 hrs USPAP) and we were taught to use the cost approach only for RC. All appraisers I ever worked with ignored the cost approach, but never confused it with market value. I have never heard of an appraiser ever being hired for cost approach only.