The Quote is a Lie

March 19, 2009 3:19 PM

How binding are homeowners insurance quotes?

So we bought a house recently. During the whole process I was given a quote for a homeowner's insurance premium of $X premium + $25 fee. This informed my decision to pick this particular insurer, Farmers.

The deed was done. Now it's a couple weeks later and here come the bills. Farmer's is saying the premium is actually $X + $Y + $25 and escrow and the lender are sending gibberish letters about the difference.

Given that I'm about to call Farmers and say, "You said $X, WTF is with the $Y?", to what extent is this shenanigans vs. the usual business-as-usual gouging? How much should I scream before I meekly acquiesce to bullshit homeowner screwjob #793275.

posted by fleacircus to home & garden (6 comments total)

Do you have the actual original written quote on paper?
posted by turgid dahlia at 3:27 PM on March 19

IANAL, but I'd be more worried about the lender getting fussy about the property they probably mostly own being insured. Make sure they know what's going on.
posted by substars at 3:31 PM on March 19

turgid, I don't except in that it became part of the closing costs; we paid $X + $25 at closing, and now Farmers is pretty sure someone owes them $Y.
posted by fleacircus at 3:45 PM on March 19

In Texas, they're not. A quote is, at best, a "free estimate." What you need/want is something called a binder which is a larval-stage policy that's put into effect at the time payment is made and "binds" the company to the terms indicated on it. The actual policy is written a few days later.

If you're getting the shaft from Farmers, find another insurance company. You may have to pay the initial 25% or whatever payment (most HO companies don't require a full annual payment) to start the policy but your new insurance company will bill your mortgage company (via escrow) for the difference. You'll get a refund from Farmers--which may come to you or your escrow--and everything will settle out at either that point or when your escrow review comes up in a year.

Do this fairly quickly. Mortgage lenders get antsy about there being no insurance coverage and if they believe there's isn't any they can "force place" you with a company that will cost several thousand dollars per year and only insures the mortgage company's interests, not yours.
posted by fireoyster at 4:45 PM on March 19

I would just suggest to them that "Well, you said it would cost this initially, but now you're saying it costs this, and we'd rather you stick to your initial price or we will find another insurer."
posted by turgid dahlia at 6:11 PM on March 19

The quote is only binding if you put down money at the time they gave you the quote. It's up to the insurer to determine whether or not they will allow you to do this.

You received a quote, nothing more. Once the completed application went to underwriting, the underwriter decided that insuring your house was too risky to warrant the low premium quoted, so they are raising the premium accordingly.

This is not a problem with Farmers; it's the way insurance underwriting works.
posted by Ziggy Zaga at 11:39 AM on March 20