Homeowner's Insurance - Just want coverage if it burns down

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RedwoodsCA
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Homeowner's Insurance - Just want coverage if it burns down

Post by RedwoodsCA »

Started thinking about this while reading another thread about increasing insurance rates...Are there policies that are very high deductible that really only go into effect if the worse case scenario happens (e.g. full destruction)? I could pay off my house and "self insure" for most things, but I would want a policy that covers a total loss. I'm paying about $3500/year right now and neighbor's policies are renewing above $7k. Ten years not paying that difference and I could self fund a new roof or almost any other non total loss.
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TomatoTomahto
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by TomatoTomahto »

We could probably self-insure for a total loss, but would not want to risk liability in the event someone has an unfortunate thing happen on our property. We have excess liability coverage (“umbrella”).
I get the FI part but not the RE part of FIRE.
CloseEnough
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by CloseEnough »

Interesting question, something I have thought about as well given cost of homeowners insurance and virtual never use of it.

I don't know if that type of coverage is available, and even if it is, it would not surprise me if the reduction in cost is not enough to justify only purchasing that level of coverage. Worth checking. It could be that you either have to fully self-insure, or continue with the "normal" coverages. And of course it would be state specific.
flarf
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by flarf »

Ask your carrier or agent how high they'll go on deductibles and have them re-quote your policy.

I have a house that is miles from the nearest (volunteer) fire station with no hydrants nearby. My deductible is five figures but the premiums are still high -- underwriters can do math and know they're going to be writing a sizable check if the place burns to the ground, which has a higher probability of occurring there compared to a less rural setting.

Separately, it's also worth checking to see if there's anything else you can do to pick up a discount. Things like central station fire/burglary monitoring and water leak detection devices will more than pay for themselves if your premiums are high enough.
AznSaver
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by AznSaver »

I doubt there would be a specific policy that would fit your exact description. There should be policies available that have more restrictive causes of loss that may be less costly but I don't think many would recommend going that route. When you choose a insurance carrier that offers that type of policy you would want to consider their ability and willingness to pay out a claim (credit rating/claims handling reviews). Typically premiums are based on the replacement cost of the property, amount of liability coverage desired, claims history and credit history (where allowed). As a consumer protection most fire-only policies were disallowed.

Sometimes insurers use market value of the property instead of replacement cost which can have you pay for more protection than you would receive.
Check your policy for additional coverages that you might want to go without for example: Earthquake/Seismic Activity, Code compliance, Sewer backup. Also if applicable you can ask for a rerun of credit if it has improved to see if that can adjust things.

Cost and coverage of policies are very region and state specific, based on the cost of coverage I assume you have a high value home or have additional coverages that are driving up the cost of your premiums. The only area I know that has costs that similar would be Florida/Gulf Coast areas where there have been so many claims that insurance companies are leaving the state and finding it unfeasible to provide coverage at "reasonable" costs.
runner3081
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by runner3081 »

You're also forgetting a another key part of homeowners insurance, and that is liability.
BuddyJet
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by BuddyJet »

High deductible policies depend on your state and home value. Best advice is to shop options in your area.

https://www.google.com/amp/s/www.forbes ... tible/amp/
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quantAndHold
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by quantAndHold »

Shop around, but most of the price of your insurance is the risk that it will burn to the ground. You’re living in an area where the underwriters consider your house at a fairly high risk of a total loss for one reason or another.

You really have four options. Move to a less risky area, move into a smaller house with a lower replacement cost, go with a higher deductible if that’s possible, or suck it up and live with it.

The insurance on my 94 year old 2300 sqft house in central San Diego is still $1600, for example. When we bought it, we thought about the major risks (fire, flood, earthquake), and bought a house in a location that is at lower risk for all of those things. Not because we were worried about insurance costs in 1997, but because we didn’t want to live through any of those things happening.
MGBMartin
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by MGBMartin »

I think most folks have a H03 policy for single family type dwellings.
There is a more bare bones policy, H01 but not just if the house burns down kind of thing.
https://www.lemonade.com/homeowners/exp ... insurance/

A while back my agent was telling me about some options and he did mention some kind of shared risk policy like 50/50 but I can’t remember exactly what it was he said.
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Outer Marker
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by Outer Marker »

RedwoodsCA wrote: Sun May 21, 2023 9:19 am Started thinking about this while reading another thread about increasing insurance rates...Are there policies that are very high deductible that really only go into effect if the worse case scenario happens (e.g. full destruction)? I could pay off my house and "self insure" for most things, but I would want a policy that covers a total loss. I'm paying about $3500/year right now and neighbor's policies are renewing above $7k. Ten years not paying that difference and I could self fund a new roof or almost any other non total loss.
What's your current deductable? When I had a $50K deductable on a $1.6M home, insurance was a about $1,000 annually. As the loan balance declined, the bank made me lower the deductable to $25K to meet their requrements, but the policy only went up by $250 annually for the $25K in additional coverage. Not terrible. The policy is through GEICO/Travelers.
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BolderBoy
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by BolderBoy »

RedwoodsCA wrote: Sun May 21, 2023 9:19 amAre there policies that are very high deductible that really only go into effect if the worse case scenario happens (e.g. full destruction)?
You could look at Chubb. They offer a deductible of $100k, for example. They are picky about who they will insure.
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DoubleComma
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by DoubleComma »

RedwoodsCA wrote: Sun May 21, 2023 9:19 am Started thinking about this while reading another thread about increasing insurance rates...Are there policies that are very high deductible that really only go into effect if the worse case scenario happens (e.g. full destruction)? I could pay off my house and "self insure" for most things, but I would want a policy that covers a total loss. I'm paying about $3500/year right now and neighbor's policies are renewing above $7k. Ten years not paying that difference and I could self fund a new roof or almost any other non total loss.
Your user name suggests you’re in California.

The California Fair Plan insurance, essentially insurance of last resort, is effectively only converting major destruction/full destruction. Most CFP policy holders need to pair it with a Difference in Conditions (DIC) policy to cover other perils, liability and contents.

If you get a CFP policy and skip the DIC you might be accomplishing what you want.

Otherwise just raise your deductible to a point that you are really self insuring everything but total destruction. Our deductible is $5000, the difference in rate to take on $10k deductible wasn’t worth it.

If you have a mortgage this might not be an option, Often the mortgage will have a minimum deductible to cover their collateral. Your broker should be able to help you. If you aren’t using a broker, and getting the policy written by a captive agent, maybe try a broker.
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cchrissyy
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by cchrissyy »

i have a similar attitude and recently checked with my insurers what the effect is on the premiums if i raise the deductible to various levels. the result was so minimal that i ended up making no change.
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BolderBoy
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by BolderBoy »

cchrissyy wrote: Sun May 21, 2023 4:08 pmi have a similar attitude and recently checked with my insurers what the effect is on the premiums if i raise the deductible to various levels. the result was so minimal that i ended up making no change.
Agreed. The difference between a $50k and $100k deductible with Chubb wasn't very much.
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NYCaviator
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by NYCaviator »

RedwoodsCA wrote: Sun May 21, 2023 9:19 am Are there policies that are very high deductible that really only go into effect if the worse case scenario happens (e.g. full destruction)?
AIG offers 50k deductible and I think even 100k. If you have a total loss, they will waive the deductible and cut you a check. I think Chubb does the same thing. So you are basically insuring only a catastrophic loss. Our roof/siding is a % of dwelling on both of our houses, which means that it is so high I may as well just self-insure for the roof.

There are other things you want to think about, aside from fire. I recall reading that one of the biggest HO losses (aside from fire) is water. This is an especially big problem if you have a finished basement. Water damage can be very, very, very expensive to fix properly (which includes making sure no mold forms, etc.).

It sounds like you live in CA, so unfortunately high insurance costs come with the territory.
OffgridSooz
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by OffgridSooz »

You appear to live in California. Perhaps consider yourself fortunate to have insurance coverage at all! Your premium doesn't seem that high considering the wildfire risk in many regions in CA. Many homeowners in CA experience insurance cancellations and are paying much higher premiums than you are.

Someone in this thread mentioned California Fair Plan, which is insurance of last resort for otherwise uninsurable homes. In order to qualify for CFP one must show proof that they are unable to obtain insurance coverage for their home. Three rejection letters from insurance providers are required. You have existing coverage so you are not eligible for CFP.

On a related note, my CA home was totally destroyed in a wildfire in 2017. My home was in a very high risk location. The only insurance I had been able to obtain prior to the wildfire was CFP. I am grateful that I had the coverage. I don't like it but I totally understand who homeowners insurance is so expensive, and sometimes difficult to obtain, in California.
FellsGuy
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by FellsGuy »

BolderBoy wrote: Mon May 22, 2023 3:51 pm
cchrissyy wrote: Sun May 21, 2023 4:08 pmi have a similar attitude and recently checked with my insurers what the effect is on the premiums if i raise the deductible to various levels. the result was so minimal that i ended up making no change.
Agreed. The difference between a $50k and $100k deductible with Chubb wasn't very much.
If you're a Chubb insured the last thing you are worried about is the cost of insurance. If you have a hum drum home depot grade house no matter how big and very few items scheduled on the policy like a collection of modern art, priceless antiques or high end jewelry etc Chubb is not for you.
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SavinMaven
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by SavinMaven »

Check your mortgage terms first - you mentioned your house isn't paid off yet. The lender will have specific terms in your agreement with them as to what they require for your homeowners' insurance. See what the max deductible they permit is, they ask an independent agent to run quotes.
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by Mudpuppy »

NYCaviator wrote: Mon May 22, 2023 7:35 pm
RedwoodsCA wrote: Sun May 21, 2023 9:19 am Are there policies that are very high deductible that really only go into effect if the worse case scenario happens (e.g. full destruction)?
AIG offers 50k deductible and I think even 100k. If you have a total loss, they will waive the deductible and cut you a check. I think Chubb does the same thing. So you are basically insuring only a catastrophic loss. Our roof/siding is a % of dwelling on both of our houses, which means that it is so high I may as well just self-insure for the roof.
AIG and Chubb are likely not options for the OP since they are in California. The OP might want to find a highly-recommended insurance broker to help them shop around, if they don't want to do that legwork themselves.
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jeffyscott
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by jeffyscott »

MGBMartin wrote: Sun May 21, 2023 11:03 am I think most folks have a H03 policy for single family type dwellings.
There is a more bare bones policy, H01 but not just if the house burns down kind of thing.
My understanding is that the main difference between those is that HO1 specifies what it covers while HO3 specifies what is does not cover. As your link states, there is a list of specific perils that HO1 does cover anything not on the list is not covered at all.

I think it would be much better to take an HO3 (or HO5) policy with the highest available deductible that the lender allows vs. downgrading to an HO1. The HO1 is like having a 100% deductible for anything other than the named perils.
Farmerberg
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by Farmerberg »

I always ask for the highest deductible. It's usually 5%
I also want to lowest medical deductible; ideally zero, but most insurers require at least $1K. An agent once told me in all his 27 years, he has only seen one medical claim and it was a trampoline related injury.
dagsboro
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by dagsboro »

My experience is that it's best to buy a very good policy from a very good insurance company and supplement it with an umbrella policy roughly equivalent to your net worth. Please do not stint on insurance or the quality of the company you buy it from. In the case of life insurance, unless you are single with nobody depending upon you, buy the longest term life policy you can afford, again from a highly reputable and financially stable company. Don't forget disability insurance and long term health care insurance. Consumer Reports Magazine periodically rates insurance companies on how they perform for clients. As the president of Rolls Royce once said, "quality is remembered, long after price is forgotten."
MGBMartin
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by MGBMartin »

jeffyscott wrote: Mon Jun 05, 2023 8:17 am
MGBMartin wrote: Sun May 21, 2023 11:03 am I think most folks have a H03 policy for single family type dwellings.
There is a more bare bones policy, H01 but not just if the house burns down kind of thing.
My understanding is that the main difference between those is that HO1 specifies what it covers while HO3 specifies what is does not cover. As your link states, there is a list of specific perils that HO1 does cover anything not on the list is not covered at all.

I think it would be much better to take an HO3 (or HO5) policy with the highest available deductible that the lender allows vs. downgrading to an HO1. The HO1 is like having a 100% deductible for anything other than the named perils.
Yep, I think you might right.
My homeowners went up 25% for each of the last 2 years, $400 then $600 increases.
I think my next move will be to increase the deductible to 5 or even 10%.
I don’t have much confidence in getting paid out if the big hurricane hits in my area; but I’m stuck with the insurer of last resort.
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Aggieland
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Re: Homeowner's Insurance - Just want coverage if it burns down

Post by Aggieland »

jeffyscott wrote: Mon Jun 05, 2023 8:17 am
MGBMartin wrote: Sun May 21, 2023 11:03 am I think most folks have a H03 policy for single family type dwellings.
There is a more bare bones policy, H01 but not just if the house burns down kind of thing.
My understanding is that the main difference between those is that HO1 specifies what it covers while HO3 specifies what is does not cover. As your link states, there is a list of specific perils that HO1 does cover anything not on the list is not covered at all.

I think it would be much better to take an HO3 (or HO5) policy with the highest available deductible that the lender allows vs. downgrading to an HO1. The HO1 is like having a 100% deductible for anything other than the named perils.

HO1 may be a actual value instead of replacement value policy? Not sure how the actual value is determined and if insurance company tries to play hardball on the actual value. Might be a consideration!
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