Need Help Tailoring Homeowner Insurance in WI
April 26, 2010 3:28 PM   Subscribe

I am buying my first home in Wisconsin and needs homeowner insurance. Different companies are giving me different suggestions on minimum coverage. Can you help us out?

My wife and I are buying a home worth $280,000. We want to insure it but different companies seem to be giving us different quotes with different variables.

Dwelling: How much should we really cover? The land is assessed by the city as 50K. Therefore, the house itself seems to be worth 230K. I've been thinking that the interior is probably worth about 30-40K worth of upgrades/appliances/furniture/etc.
We gave GEICO the address and they estimate replacement cost as 348K with a $680 annual premium.. another company estimated replace value as 270K with a premium of $800.

Other structures: We have nothing else on the 0.22 acre property but the attached garage and a small picket fence. Should we be paying this?

Personal Property: We keep getting quoted at like 50-75% of Dwelling value. Am I missing something here because I don't believe I have more than 30K worth of belongings in the house.

Personal Liability: Someone suggested getting 300K. The insurance agents keep warning me that Wisconsin has laws giving 500K in cases of wrongful death of adult. (I don't have a pool. The only way I can forsee someone dying on my property is trying to hop over the fence and being pierced by a picket fence..?

Medical payments: You get the picture.. I have no idea whats a good number..

In conclusion, my wife and I want to insure against catastrophic things. Fire burning down our house.. Backup of sewers/drains.. Tornados.. Someone dying on our property and dependents claiming it was our fault.. A burglar trying to break in and becoming a handicap after dropping the TV on his feet..

We are fine with $1000 deductible and won't make claims for hail breaking a window or other minor things that our emergency fund can't handle.. It's a big things that we would like to insure against.

Can anyone help us make the right choices?
posted by InvestorMD to Home & Garden (4 answers total) 5 users marked this as a favorite
Geico's replacement sounds more right to me, especially with the housing market currently being down.

Personal Property: you'll be buying more stuff, and while that number seems high now, it may not in the future. My take is that having it a little high is good, because it means I don't have to call my agent when I buy a new couch.

Personal Liability: yeah, 1/2 million is typical.

The numbers don't seem that unreasonable to me.
posted by DaveP at 4:22 PM on April 26, 2010

Ms. Vegetable works for an insurance company:
- Dwelling: I agree with DaveP, the Geico number for replacement value sounds closer to right. You're probably getting a good deal on the house, so it very well could be worth more than you're paying for it. Add to that the actual cost to replace your house - rebuilding is more expensive than you think because of increased costs of labor and materials (historically) over time.
- Other Structures: may be included in your base premium. If not, get rid of it if you can. This is intended for things like unattached garages and sheds.
- Personal Property: Make sure you're getting replacement cost, not ACV (depreciated cost). 50-75% is pretty standard for this. Think of it as replacing everything from the walls in - cabinets, appliances, carpeting, furniture, PLUS personal items like clothing and electronics. Before changing this percentage (which you can usually do for a cheap fee), do a real home inventory. A hard core one. Write it down. Estimate how much it would cost you to replace everything. Then decide if it's worth saving $100/year to have less personal property coverage.
- Personal Liability: This also covers guests in your home and anybody who may slip/fall on your icy sidewalk, or trespass through your yard and get bitten by your dog, or sometimes even just you if you're getting sued by somebody for whatever. Don't skimp on this. Depending on your personal finances, somebody can clean you out. 1 million is a pretty common starting point as well. 3-5 million is not unheard of, by any means.
- Medical: If you have health insurance already, don't bother with this.
posted by a robot made out of meat at 4:40 PM on April 26, 2010

I have my homeowners insurance with USAA (and highly recommend them, if you are a member). My home was my first house, so I was completely baffled. I asked them for advice, and I trust the advice they give, as they always seem to tell me the truth even when it does not benefit them. Like you, I see insurance as being for financially catastrophic incidents, not just hail damage. Here's the coverage I got:

Dwelling: The price of my home times 1.25
They explained that it needed to be a little more than the price of my home, to accommodate fluctuating costs for building materials and labor, etc.

Other Structures: The price of my home times 0.35
I don't remember what this is, or how we got to this number. I have no pool; I do have a wood fence but it's not that expensive.

Personal Belongings (includes replacement cost): The price of my home times 1.0
This is defined as "your belongings that can be moved from one location to another, such as household goods, furniture, electronics or clothing." When I first moved in, this did not make sense to me. But now it does. If you lost everything: You are replacing how many pairs of jeans at $50/pair? You are replacing your spice cabinet, at $10/jar of spices. Your computer, TV, stereo, art on the walls, towels in the bathrooms, drapes. It's not just furniture, it's everything.

Loss of Use: A hair less than the "Other Structures" cost
This is defined as "coverage in the event your home is uninhabitable as a result of a covered loss." Basically, a hotel room, or other temporary housing. What if your home burns down, and it takes 6 months to rebuild? This pays for where you live during that time.

Personal Liability - Each Occurrence: $300,000
This "provides protection if someone makes a claim or files a suit against you or someone covered by the policy for accidental personal injury or property damage. This coverage includes the cost to defend any such claim or suit." They thought this was acceptable since I don't have many visitors, don't have big trees in my yard, don't have children visiting, etc.

Medical Payments to Others: $5,000
This "provides coverage for medical expenses for people other than you and your family who may be injured either on your premises or as a result of your actions away from the home." Again, this was acceptable for the same reasons as my personal liability coverage.
posted by Houstonian at 6:10 PM on April 26, 2010

The purchase price is the current "market value" of the real estate. For insurance purposes, you need to determine the "replacement cost" or how much will it cost to rebuild the home in the event of a total loss with the "same kind and quality" construction. For example, at the height of the real estate boom, your $280,000 home may have had a market value of $600,000. A simplistic method and not extremely accurate one, is to determine the replacement cost by multiplying the home's square footage by the average cost per square foot to rebuild. Backing into the replacement cost of $348,000 the cost per square foot would be about $175 if your home's total square footage was 2,000 sq. ft.

So, where and how do you find the replacement cost per square foot? Use Web tools to estimate replacement costs. AccuCoverage, an MSB site, charges $7.95 and walks you through a questionnaire that usually takes 20 to 30 minutes to complete. Another site, HomeSmart Reports, charges $6.95 and takes less time but offers less detail.Bach said. HomeSmart Reports gives a low and high estimate of what it would cost to replace your home, plus a standard cost of construction in your area, but it doesn't account for custom features.

Since your garage is attached, it's considered part of the dwelling; however don't include its square footage with the dwelling's total square footage. The cost per sq. ft. is considerably less for your garage.

The "Personal Property" (your stuff inside the dwelling including anything that's not part of the building) is a set percentage of the dwelling value and that percentage may vary among insurers. Same thing with "Other Buildings".

Your decision regarding Personal Liability limits is more subjective. It's for your liability to third parties' (not you or your family residing with you) bodily injury or property damage. You may be perceived as having "deeper pockets" if you are a professional in a high income bracket. With no pool and just starting out in your career, you could go for lower limits.

Medical Payments don't require proof of any "legal liability" on your part before paying for the medical bills from someone injured on your premises. Typical limits are $5,000 to $10,000.

You usually get what you pay for, so the coverages provided are as important as the limits. Ask for "Special Form Coverage (not Basic or Standard forms), Replacement Cost Coverage with Inflation Protection and Ordinance or Law coverage (if over x% of the dwelling is destroyed, your city or county ordinance may require the entire building be demolished and rebuilt. Without this coverage, insurance would only cover the percentage of the dwelling that was destroyed, leaving you responsible for the difference). Increased Cost of Construction (to meet more stringent building codes) Loss of Use/Extra Expenses and other coverages should be considered.

Agree with having an inventory. Also, photos of interior and exterior of home will help in verifying the quality of the construction and furnishings in your home. Keep copies of these off site - maybe email them to yourself. Find an agent you're comfortable with and who will help you decide and compare coverages. An "Independent Agent" represents several insurance companies and may be more impartial than an office that only writes for one insurer.
posted by wabanada at 11:53 PM on April 26, 2010

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