Homeowners insurance coverage amount is too high : Bad Credit Advisor

Homeowners insurance coverage amount is too high

Q: How much homeowners insurance coverage is enough and can I, the homeowner determine the coverage amount as long as the loan is covered? My home and land combined value was appraised at $347,000 in 2006 and the house was paid off. Last March, I took $65,000 home equity loan with Wachovia and took homeowners insurance with Farmers with $70,000 coverage amount. Last week Wells Fargo sent me a letter demanding to take a policy for $275,000, which Wells Fargo claims is my home value today. Needless to say, my insurance premium will more than double.

A: The lender may only demand insurance coverage amount enough for the replacement value of the actual dwelling. Based on what you said, the asking coverage amount is too high, way too high. Check with Farmers and few other insurance companies what is the replacement cost in your area. You can get a rough idea yourself, multiplying your square footage by the builder price per square foot. If you have 2,000 square foot house and an average builder in your area charges $100 per square foot, your homeowners insurance coverage amount should be around $160,000 because most policies now include extended coverage for up to 25% more than the policy maximum dollar amount. Then call Wells Fargo and discuss this issue. If you get nowhere with Wells Fargo, contact your state Department of Financial Institutions, which in some states called Department of Financial and Professional Regulation.

Sat Jan 31, 2009 12:01PM by Tony | More in Insurance | Comments (0)

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