The extended replacement endorsement on the Farmers Insurance policy requires that the home is insured to value according to the replacement cost guide of the insurance company. The consumer has the option of insuring for more than the replacement cost guide and a good agent will make this recommendation for higher coverage knowing that construction costs are almost always higher than the guide used by the insurance company.
I try to run replacement cost estimators on all of my clients at renewal. It is time consuming, but effective.
I find that property policies need to be increased, more than the 4% automatic increase, ever year. And every year when I explain to my clients that they need to increase their policy 80% refuse because of the minimal increase in premium.
And because I didn’t start in insurance yesterday, I have my clients sign off stating that they were offered an increase and they chose to reject it. I do this because these are the ones that will try to sue when there isn’t ehough coverage to rebuild their homes.
I put most of the blame on consumers that are price shoping. But I also think that we, as agents, are setting ourselves up for a fall if we don’t offer increases and get in writing that it was rejected.
I catch greif all of the time for trying to insure to value. I do cost estimators and the client goes into orbit because it is more than the sales price. Then when it comes to claim time it is my fault 100% of the time if the coverage is not adequate even if the customer signed a stmt of understanding.
I have only had one person in 5 years change their mind after I gave them the form to sign.
I go so far as to require, on the form, that they handwrite they have been presented with an RCE showing they are underinsured and have choosen to not increase their policy.
Some get agrivated that I require this, but I would rather loose a client that is price shoping than get sued.
John, sorry I am looking at your endorsement (Farmers)and it does not state that it be insured by the cost guide of the insurance company. Farmers Insurance or any carrier for that matter would be foolish to have such an endorsement, which would imply guarantee. Farmers Insurance or any other carrier will not pay one dime more than the insured amount unless it is at full replacement at the time of loss. No exceptions.
The problem is not that the insured does not want the coverage, the problem is they do not like the cost increase. This is why I am no longer captive, I oferr increased coverage through many carriers, deductibles, and options at a price equal to what they are currently paying. I am batting 100%……….
I manage the problem at the front end – if a client is not interested in insuring to value, I send them down the street. Life is too short to worry about underinsured home fires.
I usually only see their dec pages, not the entire policy. I think they only have 120-125% ERC coverage…and almost all without exception have lower Coverage A limits than I get on a detailed MS&B R/Cost Estimator.
Are some of these policyholders falling short of the 80% co-insurance clause I see in most HO forms…and the 10% Building Code Upgrade coverage limits I see on several other HO3 policies? (Not on Farmers.)
Policyholders don’t know the meaning or extent of these clauses and IMO it is up to the carriers and their agents to explain those in detail. When I explain the 80% co-ins clause to prospects with such wording in their policies…and the advantage of full building code upgrade coverage after Northridge… it ends all discussion on the proper amount of coverage.
I an often asked why we ask so many questions about their residence…nobody else does. That’s a good indication that some others are looking at a pure RC based on sq. ft. CSE (IIRC)learned that didn’t work in the Oakland Hills fire…often by 200-300% under-insurance, so then they sued their agents.
isn’t this value or should not this value the same as the cost of the rebuilding of the building? should this not be looked at once a year? if so, why does not the agent show both the value and costs. obviously you need to inform the policy holder because that is your company’s money and your commission. then you will be able to delight the customer because you did look after their interest. afterall, purchasing a home is a major investment.
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The extended replacement endorsement on the Farmers Insurance policy requires that the home is insured to value according to the replacement cost guide of the insurance company. The consumer has the option of insuring for more than the replacement cost guide and a good agent will make this recommendation for higher coverage knowing that construction costs are almost always higher than the guide used by the insurance company.
I try to run replacement cost estimators on all of my clients at renewal. It is time consuming, but effective.
I find that property policies need to be increased, more than the 4% automatic increase, ever year. And every year when I explain to my clients that they need to increase their policy 80% refuse because of the minimal increase in premium.
And because I didn’t start in insurance yesterday, I have my clients sign off stating that they were offered an increase and they chose to reject it. I do this because these are the ones that will try to sue when there isn’t ehough coverage to rebuild their homes.
I put most of the blame on consumers that are price shoping. But I also think that we, as agents, are setting ourselves up for a fall if we don’t offer increases and get in writing that it was rejected.
In a he said, she said who is jury siding with?
I catch greif all of the time for trying to insure to value. I do cost estimators and the client goes into orbit because it is more than the sales price. Then when it comes to claim time it is my fault 100% of the time if the coverage is not adequate even if the customer signed a stmt of understanding.
Smart move.
And how many still refuse to increase coverage after you present them with the declination acknowledgment to sign?
I have only had one person in 5 years change their mind after I gave them the form to sign.
I go so far as to require, on the form, that they handwrite they have been presented with an RCE showing they are underinsured and have choosen to not increase their policy.
Some get agrivated that I require this, but I would rather loose a client that is price shoping than get sued.
John, sorry I am looking at your endorsement (Farmers)and it does not state that it be insured by the cost guide of the insurance company. Farmers Insurance or any carrier for that matter would be foolish to have such an endorsement, which would imply guarantee. Farmers Insurance or any other carrier will not pay one dime more than the insured amount unless it is at full replacement at the time of loss. No exceptions.
The problem is not that the insured does not want the coverage, the problem is they do not like the cost increase. This is why I am no longer captive, I oferr increased coverage through many carriers, deductibles, and options at a price equal to what they are currently paying. I am batting 100%……….
I manage the problem at the front end – if a client is not interested in insuring to value, I send them down the street. Life is too short to worry about underinsured home fires.
I usually only see their dec pages, not the entire policy. I think they only have 120-125% ERC coverage…and almost all without exception have lower Coverage A limits than I get on a detailed MS&B R/Cost Estimator.
Are some of these policyholders falling short of the 80% co-insurance clause I see in most HO forms…and the 10% Building Code Upgrade coverage limits I see on several other HO3 policies? (Not on Farmers.)
Policyholders don’t know the meaning or extent of these clauses and IMO it is up to the carriers and their agents to explain those in detail. When I explain the 80% co-ins clause to prospects with such wording in their policies…and the advantage of full building code upgrade coverage after Northridge… it ends all discussion on the proper amount of coverage.
I an often asked why we ask so many questions about their residence…nobody else does. That’s a good indication that some others are looking at a pure RC based on sq. ft. CSE (IIRC)learned that didn’t work in the Oakland Hills fire…often by 200-300% under-insurance, so then they sued their agents.
isn’t this value or should not this value the same as the cost of the rebuilding of the building? should this not be looked at once a year? if so, why does not the agent show both the value and costs. obviously you need to inform the policy holder because that is your company’s money and your commission. then you will be able to delight the customer because you did look after their interest. afterall, purchasing a home is a major investment.