anon (08/05/82)
Your question about homeowner's insurance brings to mind something that
I learned long ago about it. Legally ( at least a few years ago ) all insurance
companies offered only 3 types of coverage for homeowners. Im not sure
what these categories were called, but for the sake of this article I will
call them 1,2,and 3. Category 3 was the most expensive and covered almost
everything that could happen in and to your home. The premiums were prohib-
itive, however. Category 2 was the type of policy that all mortgage grantors
required as minimum coverage and is the type that most homeowners carry. The
premiums are reasonable and the coverage is good, but not as complete as
type 3. Category 1 is a very minimum type of coverage and is used by
people that do not carry a mortgage. The coverage is minimal and so is the
premium.
I was told by a friend of mine in the insurance business that all policies
on the home carry a maximum amount that the company will pay for a total loss.
Mortgage companies check your policy to make sure that they get the outstanding
principal on your loan before they grant the mortgage. One interesting fact
came out of my initial discussions about insurance and that was if your home
was totally destroyed, the insurance company would pay up only to the limit
of the policy. So say that your house was hit by a tornado while you were away.
The company would pay the limit of your policy which most homeowners set at
the purchase price of their home less the cost of the lot. There would be no
additional money paid to clear your land of the rubble so that construction
could start. This could amount to many thousands of dollars, depending on
how much damage was done. This money comes out of your pocket unless you
insure for more than the price of your home.
From the above discussion I really doubt the claim made by Allstate
for complete replacement unless the make you insure for far more than
you may really want to. ( Maybe they make you buy a category 3 policy
instead of a category 2 or maybe they make the max on the policy much
higher than the cost of your home. )
Insofar as claim handling goes, Allstate tried to hold down "expenses"
at one time by the questionable business tactic of delaying payment of
claims for 90 days or more. Even today many people will still refuse to
do business with them ( myself included! ).
While these facts are accurate to the best of my knowledge, there
may some new developments in recent years that may change the conclusions
above. If so please post them to the net that we may all learn. Homeowners
insurance is very important to us all and to our families.