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Home Insurance Premium Scam – ONIG Financial Blog

Home Insurance Premium Scam - Financial Samurai
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It’s been two weeks since I found out I was being scammed by my insurance company. I sent in my 8 month old house appraisal to Tricky Dick, who is trying to raise my home insurance premium by 45% since their inspection 7 months ago. 

Their shady inspector made my house 50% larger than it really was, so they could raise my premiums by a similar magnitude. It’s so easy to prove what my house’s square footage is, it’s not even funny.  It’s like saying Lebron James is 10 feet 5 inches instead of just 6 feet 8 inches tall. Utterly ludicrous and so easy to disprove!



The recent appraisal I sent in contains perfectly drawn outlines of my house’s layout and square footage. It matches up to within 50 square feet of what the SF County Assessor’s has on record. I’ve had two other appraisals in the past 7 years, and both are also within 50 square feet of the real size.  Clearly, this case is as slam dunk!

If you’re curious, here’s the e-mail exchange I had with them with names, figures, and dollar amounts changed that mimic the same percentages. All of this takes precious time. 

In this post, you will learn what the tricky “Home Protector Insurance” product is. You’ll also learn whether the rebuild cost premium you pay trumps the square footage size they have in their documents, and what you get to rebuild if your house blows up.

Fighting It Out With My Home Insurance Company



Dear Sam,

If you can provide the breakdown of the square footage of your home from your appraisal when you recently refinanced your home, that would be great.  On the Tricky Dick inspection, it currently shows 3,000 total square feet (which is 50% greater than reality):  first floor: 1380; 2nd floor: 1500; 3rd floor: 120.

You may fax over the information if you prefer to:  1-800-XXX-XXXX

Thank you,



Tricky Dick Representative

MY RESPONSE:

Hi Tricky Dick Rep,

My house is officially 2,000 square feet of warranted living space based on the SF county records and a recent home appraisal.  Please rectify this major over assessment in the system. It makes me feel that there is fraud with Tricky Dick pushing the home inspector to overvalue my house so that Tricky Dick can charge a higher premium. The reason why I’ve been a customer for so long is because of Tricky Dick’s excellent reputation and service. I hope this is just one big oversight.



Please see the appraisal report which outlines on page 5/29 of the PDF the livable square footage of only 2,000sqft. On page 6/29, you can see them do the cost approach analysis of 2,000 X $375 build cost/sqft = $750,000 + $48,500 for the garage area = $798,500 TOTAL. $798,500 is basically inline with what I previously had with Tricky Dick.

The attached report is dated 7/2010 and therefore very recent. I have done nothing since 7/2010, which includes when the inspector came in 4Q2010.

I request that Tricky Dick not only credit me the months that I have been overcharged by the egregious 3,000sqft assessment, I also request that Tricky Dick  does something to compensate me for the 3+ hours I’ve spent digging up this detail, talking on the phone, following up, and writing this e-mail. Seriously Tricky Dick rep, I am very disturbed I could get a sudden 45% increase in my home premium after such an inspection. I have ~$XXX,000 in CDs with Tricky Dick and do my auto, valuable personal property, and rental  insurance with Tricky Dick.

Please make this right. Please also respond to this e-mail so that I know that you have received it.

Regards,



Sam

TRICKY DICK RESPONSE

Dear Sam,

Thank you for your email.  I will look into this information you provided me and I will get back with you next week.  Please know Tricky Dick  is a very reputable company since 1922 and we are not looking to purposely increase premiums.  It’s about insuring your home accurately so we can restore your home back to it’s original condition, should there be a loss.  We do not want to over insure your home, nor do we want to under-insure it either.  I will review this information with my manager and will be in touch with you.

We value your business and the opportunity to serve all your financial needs.

Thank you,



Tricky Dick Rep

TRICKY DICK RESPONSE ONE WEEK LATER

Dear Sam,

I just tried calling you about an hour ago on your cell phone but could not reach you, so I’m emailing you the response from the Inspection Department.  We received word from the Inspection Center about your home and they are changing the square footage to the 2,000 sq footage and recalculated your rebuilding cost to now be: $950,000. This would make your new premium: $2,000 per year (from $2,400, but was only $1,400). 

There are a couple other options if you wanted to explore as well:  we could go as low as 95% of the rebuild cost ($905,000) which would make your premium: $1800.  Another option:  we could keep the rebuild cost at $950,000 and remove the Home Protector coverage.  The home protector coverage provides additional coverage if the amount of a covered loss exceeds your dwelling coverage limit because of increased building costs, building code changes, inflationary effects from material shortages or additional debris removal expenses.  If you decide with this option, your premium would change to: $1600.

We value your business and the opportunity to serve all your financial needs.



Thank you,

Tricky Dick Rep

MY RESPONSE

Dear Tricky Dick Rep,

Please clarify what my previous rebuild cost and annual premium is currently after the reassessment in February 2011, as well as the rebuild cost and annual premium was in 2010.

What does the rebuild cost encompass?



Regards,

Sam

TRICKY DICK RESPONSE

Dear Sam,

Your premium from 2/2010 thru 2/2011 was: $1400 and your dwelling rebuild cost was $730,000.  At renewal 2-28-11, your current rebuild cost is (from inspection): $1,120,000, and premium is currently $2,350.  Rebuild cost includes: current labor and building costs in your area, architect fees, debris removal, building permits, contractor fees, etc.

We value your business and the opportunity to serve all your financial needs.

Thank you,



Tricky Dick Rep

MY RESPONSE:

Thanks Tricky Dick Rep.

And to clarify, which trumps which? The rebuilding cost budget I have or the square footage? In other words, am I only allowed to rebuild up to 2,000 of livable square footage even if I only spent say $600,000 of the $950,000? Or, can I keep building until my $950,000 is used?

I’m assuming that I have the right to use up my entire rebuilding cost and build whatever size I want within reason since you guys have been charging me for it?  Does the rebuild cost consist of all the fixtures?

Also, just eyeballing these figures below, don’t you think it’s kind of ridiculous that my rebuild cost could ROCKET from $730,000 to $1,120,000. I do NOT have gold floors or diamond door knobs and my house has remained the same size.

Will Tricky Dick be crediting me the overcharge from Feb, March, April, and May? I hope so.



The square footage is what’s in dispute, but how much you are charging me is not. Hence, I should hope that I have the RIGHT to rebuild up to the coverage I am paying for (per my last e-mail, which hasn’t been responded to you), and not up to some seemingly arbitrary home square footage amount.

Please let me know.

Thanks,

Sam

Keep Fighting Your Homeowners Insurance Company

The Tricky Dick representative has been excellent at responding to all my questions and following up. They have changed the square footage to the real size (33% correction), yet the rebuild cost only went down 15% instead of by 33%. 

In other words, they still plan to charge me 13% more than what I’ve been paying for the past 6 years sans the “Home Protector Coverage” (this insurance for insurance is ridiculous) for my home insurance premiums.  If I were to add the Home Protector Coverage, my cost jumps 28%.

A 13% increase after 6 years is reasonable to me, given input costs have certainly increased by that amount in this time period.  A 28% increase seems on the egregious side. However, if you just do the math and calculate a 5% inflation rate per year for 6 years, equals a 34% increase. 

Since my rebuild coverage is going from $720,000 to $950,000 (32% increase), paying 13% more is a “good deal.” So all in all, I am fine with this rebuild cost increase because they’ve made an effort to adjust, and I clearly see where they are coming from now.

The main point of dispute has been my house’s square footage size and rebuild cost which relates to the size.  You should know that if your house ever gets destroyed, you have a right to rebuild your house to the maximum rebuild coverage you’ve been paying for, and not the disputed square footage size. In other words, you could build a house twice as large if the costs fit.

One thing to note regarding rebuilding costs is the implication for home prices.  With rebuilding costs forever rising with inflation, home prices will inevitably continue to rise, otherwise homebuilders will stop building because they won’t be able to make a margin.

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