Why do underwirters dictate how much insurance I need to carry when I don’t have a mortgage

Free Insurance Quote Comparison

 Secured with SHA-256 Encryption

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Full Bio →

Written by

UPDATED: Feb 23, 2012

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

Insurance Question from Chicago, IL

Asked on 02/23/2012

Why do underwirters dictate how much insurance I need to carry when I don’t have a mortgage I do not have a mortgage on my property but the broker I use tells me that I must carry enough insurance to replace the building in case of total loss. I would never consider rebuilding the property if totally lost. Also, having to insure for an amount dictated by the underwriters, the amount keeps increasing every year as much as 40% as well as the premiums. Can I only insure the property for the amount that I want? Which companies give me that option?

Answer given on March 01, 2012

Very few insurance companies will allow you to underinsure your home. They want to insure it for the full estimated replacement cost of the home. Somewill go as low as 80% of the replacement cost, but they do so reluctantly.The problem stems from the possibility of a partial loss. You say you will not rebuild the home if totally lost. However, if it is damaged by 50% or 60% percent, you will most likely want to repair the home. If the insurance company is not insuring the home for its full replacement value, then they are not getting the appropriate premium for the home. When a partial loss occurs, they may well pay the full policy amount if it were only insured for a lower amount.You may be able to adjust the amount of insurance from what the insurance company wants you to insure it for. If you can get a contractor to write their estimate of the replacement cost that is lower than current amount of insurance, you may be able to get it reduced.You should shop around as there are different insurance companies which use different formulas for the cost to replace a home. You may be able to find a company that will insure the home at a lower amount.


IMPORTANT NOTICE: These answers are for general information purposes only and are provided by the person answering and FreeAdvice.com AS IS. It has not necessarily been reviewed by the management staff of FreeAdvice.com nor is it binding any insurance agent, broker, or other insurance professional or any attorney or insurance company. Insurance laws, regulations and practices vary from state to state and insurance policies and practices differ from company to company, by type of policy, by state and locality and by type of insurance. Tiny variations in the facts, policy language or a detail not set forth in a question often can change the outcome or a professional's conclusion. Although FreeAdvice.com has confirmed that the answer(s) was/were provided for the account of an experienced insurance professional, that professional may not be licensed in the state referred to in the question, and may not be experienced or up to date in the subject area. Unlike the answers provided here, upon which you should NOT rely, for personal advice you can rely upon we suggest you consult a licensed insurance professional in your area or retain a licensed attorney listed on AttorneyPages.com to represent you.

Free Insurance Quote Comparison

Enter your ZIP code below to compare cheap insurance rates.

 Secured with SHA-256 Encryption