With the recent media coverage about the homeowners insurance crisis in flood-prone areas in our state, all seem to leave out one “dirty trick” insurance providers are now inflicting on buyers.
Companies are now over-evaluating the replacement cost of one’s home under the guise of inflation.
After recently installing a new roof, I set about finding a new insurance provider. I live in a modest, one-story, vinyl siding/brick, 2,006-square-foot house in Ponchatoula.
Since most insurance companies use the 2 percent to 5 percent of your estimated home replacement value as the matrix for any deductible that would apply in the advent of a named storm, it is to their advantage to increase that deductible as much as possible.
One of the companies I contacted valued the replacement cost of my house at $400,000, sight unseen, based upon its square footage. Another set it at $500,000. My own estimate of total replacement cost came in at about $250,000 to $300,000.
Additionally, both these companies were applying the deduction to hurricane, wind and hail damage. One was using the 2 percent rule and the other 5 percent. So really I was only getting reasonable coverage for a fire, not any weather-related incidents.
Luckily I was able to get coverage from a large national insurance provider who valued the replacement cost of my home at $280,000, with a 2 percent hurricane-only deduction. Since my previous insurance carrier valued it at $285,000, but no longer writes up insurance coverage in my area, the $280,000 figure seems accurate.
So even if you are lucky enough to find a company that will insure your house, note what they have valued the replacement cost of that structure along with the deduction percentage. Unless your home is totally destroyed to the ground, the overinflated replacement cost will most likely lead to a deduction that will provide little to no reimbursement for any partial damage to your home.
It is obvious that the latest mindset of our new insurance commissioner, Tim Temple, to adopt a “free market approach” to help insurance companies, is a totally misguided approach, for it is obvious that these companies are perfectly capable of mitigating their increased risks with other sleazy profit-making tactics without any help from our state.
It will be interesting to see if Mr. Temple, or our esteemed legislators, address this latest unethical tactic by home insurers. I can dream can’t I?
Jim Anderson lives in Ponchatoula.
