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+--- Thread: Aloha - Insurance and Zone 2 (/showthread.php?tid=5765)
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Aloha - Insurance and Zone 2 - freespirit - 06-15-2009
Aloha:
We are in the process of purchasing a home in Nanwale Estates. The home was a foreclosure. It does need some work (like with most foreclosures). We are scheduled to close by end of July - so have been searching for Insurance quotes.
The loan balance once we close will be about 50,000 after our down etc. What I am being told is we have to insure for replacement value. So far have 2 quotes one was for over 2,000 and this paricular company said we HAVE to have our belingings covered and also loss of ues etc. They listed our belingings at 88,000 (we don't have any belongings in it nor will we EVER have 88,000 worth.
The next company was lower at $1,200 per year and we didn't have to have our belongings covered. But they also stated even when we pay our mortgage off - they still will make us cover for full replacement value. Whats with that? I have never heard of insurance where you can not specify how much you would like your home insured for if you own it. I mean if we want to insure for only 100K or less that should be up to us and not be told how much they want us to insure for.
Does anyone know of any other options we may have - like I said the balance of the loan will only be about 50,000 or less by the time we close. We are currently getting the house appraised (and I am sure it will not appraise for much since it is a fixer upper). What is the deal with having to take out way more insurance then what the house is worth? I mean if it burnt down and we only had 100K of insurance on it. It surely would be more then enough to pay off the 50,000 loan on the property. I mean 50,000 is like purchasing a mid luxury vehicle - and your not required to have insurance valued at over 150,000 on it.
Any advice or another insurance agency we might be able to go with?
Mahalo,
Laurie
RE: Aloha - Insurance and Zone 2 - John S. Rabi - 06-15-2009
Bail from those two companies! It's up to you how much you insure your home for and what kind of coverage you get as long as the lender is covered. Just remember, the insurance brokers have a vested interest in selling you the highest possible coverage. One thing you need to check on though, if your lender requires a hurricane coverage you will have to have it or go to another lender.
Aloha,
John S. Rabi, GM,ARB,BFT,CM,CBR,FHS,PB
808.989.1314
http://www.JohnRabi.com
Typically Tropical Properties
"The Next Level of Service!"
RE: Aloha - Insurance and Zone 2 - freespirit - 06-15-2009
Thank you John:
Our lender requires this -
The amount that is required is for "replacement value" or the loan amount, whichever is greater. The reason for this is, if in the event the property is destroyed, it can be "replaced" to it's "original" condition. Of course, it can never be replaced to "original" condition, however, it will need to be replaced to a condition comparable. So, the quote will change once we get the appraisal.
This is a quote from our lender. I am not sure what they mean by replaced to condition comparable?
Any suggestions which companies I should check for insurance? and yes they do require hurricane insurance, it is to late in the game to get a different lender closing is scheduled for July 10th.
Thank you,
Laurie
RE: Aloha - Insurance and Zone 2 - Lucy - 06-15-2009
Hi Laurie,
Yes as you found out, you do have to insure it, but you can ask the lender for just fire insurance only. Since you have no belongings in it, nor live there, that is the standard way to insure property like that. If your status changes, ie. if you plan on living there or move your household goods in, then it should be changed back to a HO-3 policy with full coverage to reflect that. It is always better to insure your home where you have other insurance at like your autos, if possible. Since your goal is to insure it, why not just find an insurer that you feel comfortable with is still rated highly under Best's? That way you will get a better service should you need it.
The amount of your household goods is just a percentage of your homes value. You won't get any insurance company to change the percentages and what is covered, just the type of policy offered.
Lucy
Having another Great day in Paradise, Wherever that Maybe!
Check on here doing a search and you will find others who have mentioned what company that they went with in a string talking about insurance.
Your company that you are dealing with should be able to explain to you what comparable condition or replacement value means.
RE: Aloha - Insurance and Zone 2 - freespirit - 06-15-2009
Mahalo, Lucy:
I cannot seen to get the search funtion to work on this site. It just keeps thinking but never actually shows any results.
I guess I will just call a bunch of different insurance agencies and request quotes.
Thank you,
Laurie
RE: Aloha - Insurance and Zone 2 - dcl - 06-15-2009
This was recently posted here on punaweb:
Dan De Soto
Mutual Underwriters
All Lines Agent
www.insurancehi.com
Tel: 808-961-3207
Fax: 808-969-1120
275 Ponahawai St., Ste#105
Hilo, HI 96720
RE: Aloha - Insurance and Zone 2 - freespirit - 06-15-2009
Dan:
I filled out a quote request on you website - plus left you a voice mail message, and directly sent you a email.
Looking forward to hearing from you.
Thank you,
Laurie
RE: Aloha - Insurance and Zone 2 - ric - 06-15-2009
The problem with replacement value is that it does not account for depreciation. Often "replacement value" is much higher than market value of a property. The reason for this is in the case of partial damage. For example, the structure could be only 30% damaged and the cost to repair could already exceed the market value of the property. So the premiums on "replacement value" would be higher and account for full repair of a partial loss, even if it approaches or exceeds market value. Insurance companies on the mainland also offer ACV (Actual Cash Value) policies, where you can declare the value. The downside of this is if the property is 50% damaged, you would only get 50% of the stated ACV, even if it cost 2 or 3 times that to repair. . . (i.e. everything, the structure, improvements etc. is depreciated). The ACV coverage is cheaper but you can be in trouble on a partial loss. I don't know if this is even available on Hawaii, but hope that explanation helps in understanding why they seemingly overinsure with Replacement Value policies.
RE: Aloha - Insurance and Zone 2 - freespirit - 06-15-2009
Thankyou - I understand more about why lenders would require replacement value.
So Hawaii insurance does not offer homeowners to select their coverage amounts? Meaning if I pay off my home and only want enough insurance coverage to cover the cost of what I paid for the Land/house that I could not opt to do so?
A Homeowner is forced to cover in full replacement value period even if they own the property free and clear?
I have never heard of anything like that before - I realize Hawaii in a sense likes to do things differently but to me that sounds "Like where is the land of the Free and the Freedom" that our country was built upon? I must be misunderstanding you on that part.
I also don't understand lets say a 1000 Sq ft home they do a flat rate times sq ft to calculate the coverage then times that by a certain amount (goes up only slightly based on age).
Lets say Mr. Smith his 1,000 Sq foot home is only a couple years old and and his loan balance is $150,000. And they calculate his insured replacement value at $189,000. Premium about $2100 per year. Mr. Smith paid $175,000 for his home.
Then Mr. Peterson buys a home 1,000 sq foot home and his loan balance is $20,000 and the sq ft. but that home is 40 years old very modest/basic built home and is calulated only slightly lower by X$ amount per foot and they calculate his insured replacment coverage needed would be $173,000. Premium about $1900.00 per year. Mr. Peterson paid $60,000 for his home.
This would mean both Mr. Smith and Mr. Petersons insurnace premiums would be only slightly different? According to the couple Insurance agencies I talked to the coverage amount would only be slightly higher for the new house like $10 more per sq ft. making the premiums only like about $100 per year difference for the new house versas the old one. What if either Mr. Smith or Mr. Peterson own their homes and would opt to not rebuild should their homes be totally destroyed. Would they have to rebuild? would the insurance carriers not give them any pay out unless it was to rebuild should it all be destroyed? Can a home owner choose to not have insurance on the house part but just get insurance for value of their belongings?
Sorry just trying to understand how it works is all as I have never heard of any place in the USA that forces a certain coverage on homeowners. So if you own the property you can either choose "no Insurance" or you can only be covered if you opt for full replacement value? [?] Or am I understanding it totally wrong (which I hope). I would think insurance agencies would all go broke doing it that way.
Thank you for any input.
Laurie
RE: Aloha - Insurance and Zone 2 - Bob Orts - 06-15-2009
Laurie, I don't believe the State of Hawaii mandates insurance on the property, (one of the real estate agents probably can advise on this). But your lender can mandate insurance coverage as a condition of the loan. Some lenders require coverage on the value of the property, others the balance of the loan. Some may want full coverage, others just so they get paid what is owed if something happens. Some want coverage for the full value of the property while others for the value of the structure because land is still land regardless.
This is between you and the lender and is one of the factors in picking a lender. Just like you look at interest rates, length of loan, prepayment penalties; insurance requirements is another factor that, unfortunately, many consumers don't even think about and end up having to provide something they didn't anticipate.