Sorry – It is time for a soap box rant. We have typically ALL been overcharged for home insurance!
This has been on my radar for almost a decade now and a few years back I even tried to get the media to pick up on the storey. The facts are that we were generally being over insured for the dwellings we live in. This is 100% due to an overvaluation of build costs by BC Assessment authority who have been providing a subscription service to most insurance carriers providing build costs per region on a yearly basis.
Based on my insurance documents, I was paying based on the following rebuild costs of a 1460 sq. ft. bungalow:
2005 replacement Value – $140,000 = $95.90
2006 Replacement Value – $154,000 = $105.47
2007 Replacement Value – $178,000 = $121.92
2008 Replacement Value – $204,000 = $139.72
2009 Replacement Value – $308,000 = $210.96
2010 Replacement Value – $308,000 = $210.96
2011 Replacement Value – $308,000 = $210.96
2012 Replacement Value – $308,000 = $210.96
2013 Replacement Value – $308,000 = $210.96
While reasonable in 2005, they then skyrocketed to over double the market costs to build a house based on the quality and finishings of the existing structure. And remember, just because you are insured for $308K does not mean that you could actually rebuild a house that cost $308K. They would only rebuild to the same level of quality and finishings to the original structure. This would mean a code minimum house with basic finishings. A house that even up to last year could be built for well under $125 per sq. ft. How do I know this? My neighbour appraises homes for banks who are providing construction draws to builders. He gets the fulls costs to build from the builder as part of this process. In the 2005 – 2008 period, he was seeing costs as low as $80 per square foot. Granted, these were not high end homes, but certainly better outfitted than the house I was currently living in.
I made such a stink with my carrier, that they finally agreed to provide a sizable discount on my policy that would decline to 0 over a 10 year period (I believe this is why my value became fixed at $308K)
SO now lets move forward to 2014.
As we moved into a basement suite across the street, I needed to update our policy. This worked out to $53.32 for just over the three months we had left on our policy and would extrapolate to just over $200 a year. For what? It is covering the same stuff that was in the old house, it now just has a different postal code. Is is not like we are covering anything to do with the rental house.
I then got Course of Construction insurance a month later for an extra $96 for the last two months of the policy. But the real kicker was when the new policy invoice arrived this month. My premium has gone from $80 a month before all this started to $198.
Because I have to pay for the COMPLETED value of the house I am building even though it will not be worth anywhere near that value for at least a year. And Again, it is not like I would be able to ever utilize that value. If the house burns down part way through construction, I will be compensated for the value at the time of the loss. What a SCAM. The logical approach would be to offer a graduated increasing value as the house is completed. They could make it easy and just ride on the coattails of the construction loan draw values.
But is does not stop there – Not only do I have to ensure for the full value of the finished home right from the beginning, I also have to pay for Course of Construction insurance ON TOP of this to the tune of $694 per year. FOR WHAT??? I am already insured for the full finished value of the dwelling. Can you say GOUGE!
And it does not stop even there, that $700 a year includes a 10% premium because I am an owner builder. Really – this somehow changes the value of the goods and services going into the dwelling? It is this kind of money grabbing that give insurance companies a bad name.
SO, I thought, if I am that unhappy, I should see what the options are and get a quote from a competitor. They came back with a quote of $550 PER MONTH! without even the coverage I have with the existing carrier. I am going to pay $6600 a year for house insurance? What do I own, a 30 unit apartment building? This is a single family residence.
SO I will stay with the current carrier and bite my lip (hard). The only good part, is that the costs per square foot on the new policy have declined down to $185 per square foot (based on the size of the finished structure) which is much more than I will be spending, but is a reasonable assessment of the costs if I had the currently planned structure built by others.
Thanks for listening. Needed to get that off my chest!