Underinsured during a total loss Tiffany Winter asked 2 weeks ago
Underinsured during a total loss

I purchased my home in September 2022. Excited that I have finally got to a place in my life I could purchase a home, and it being the first home I ever purchased, I was checking the boxes with what was needed. I got insurance! Great! Box checked! What I didn’t know I should do is to check my policy limits in the case of a total loss and the cost to rebuild. I purchased my home from a family member for $185K, the appraisal was right around $241K, before all the remodeling we did to the home. My home burned down in November 2022 and is a total loss. My dwelling coverage is $206k. It pays off the loan but it does not cover the cost to rebuild. I guess I never thought when looking at insurance to make sure it covers the cost to rebuild, so now I am at upwards of $100k under insured. My mortgage loan officer said since I have replacement cost they should cover the cost to rebuild no matter the price. I have done some research and I have seen mixed information whether to fight with insurance or not. Some say that the limits are the limits. But some say that I can go after them for underinsuring me. Just trying to get some insight on what the correct information is and how I need to move forward.

1 Answers
Amy Bach Amy Bach Staff answered 5 days ago

We’re sorry to hear about the insufficient dwelling limits in your policy, and hope you find a way to get your insurer to retroactively increase your policy limit so you can rebuild your home.

Our website offers lots of information on this very common problem and suggestions for strategies that have worked for some underinsured disaster survivors to convince their insurers to take that unusual step. In virtually every case where an insurer has agreed to retroactively increase coverage on a dwelling, there were facts and circumstances that supported the homeowner’s request, and the insurer insisted that the details of the settlement be confidential. https://uphelp.org/claim-guidance-publications/underinsurance-101/

We also offer a sample letter you can use to request that your insurer “reform” the policy contract and adjust Coverage A upwards to where it should have been.

The reason you’ve found mixed results in your research is that case law on who’s responsible for setting dwelling limits in a home insurance policy doesn’t always reflect reality. In reality, insurers provide their sales reps with software that calculates dwelling replacement costs and that’s how those limits are set. You probably had little to no involvement setting your dwelling limit, you simply trusted the professionals.

But when a home is damaged or destroyed and the insurance limits are inadequate, most courts will say that unless you have proof (notes, recordings, etc.) of communications where your agent or insurance company specifically promised to put limits in place that would cover the cost of replacing your home in the event of a total loss, the agent and insurer have only a “general duty” to obtain a policy, and can’t be held responsible for the shortfall.

An experienced policyholder lawyer will review your situation (generally free of charge) and advise you. Our “Find Help” directory is a great place to start, and it’s a good idea to get an opinion from more than one attorney. https://uphelp.org/sponsor-location/florida/ Good luck, we’re rooting for you!