Property Module IV Replacement Cost Determination

Property Module IV Replacement Cost

Determination

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Module IV Objectives

Review Module III Dwelling Replacement Cost Guide Review Module IV

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Review Module IIIQ: How many losses can a

prospective insured have to be eligible for coverage in FIE?

A: No losses in the past three years of any kind.

Q: How many losses can a prospective insured have to be eligible for coverage in Protector Plus?

A: The insured must have had no losses in the past three years.

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Review Module III Q: Can you write Renters policies in the Galveston and Brazoria counties? A: Yes, HO-BT policies do not cover the dwelling.

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Review Module III

TENANT HOMEOWNERS PACKAGE

Special Requirements:Minimum ___% deductible Loss Deductible Clause No. 3.Mandatory minimum of $____ Theft Deductible also required on amounts of insurance of $20,000 up to $________. Replacement Cost Coverage (HO-101) can be written if the policy is written for at least $__________ Contents Coverage.Scheduled Personal Property (HO-160) may be written in conjunction with an HO-BT.

Maximum limit single item: $________Maximum aggregate total: $________

1250

25,000

2,500

25,000

10,000

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Dwelling Replacement Cost Estimation Guide

Proper insurance to value is one of the most important considerations in insuring property. The insured needs to be properly protected. In addition, rates are based on the assumption that each exposure will be properly insured to replacement cost. If not, the premium developed will be inadequate and create the need for rate levels which may adversely affect our competitive position.

To properly protect our policyholders and our competitive position, always encourage the policyholders to carry an amount of coverage adequate to pay for the complete rebuilding of the home and to replace the personal property. The Dwelling Replacement Cost Estimation Guide is designed to determine the minimum replacement cost of a dwelling.

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Step 1 -

Select the type of dwelling that most nearly fits the description.

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Dwelling Type: One Story

Single floor, usually at grade level.

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Dwelling Type: 1 1/2 Story

Two floors, one grade level and one above. Upper floor may have full ceiling heights. Bedrooms at upper level. Number of square feet of upper level living area is 40% to 70% of living area of lower level.

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Dwelling Type: Two Story

Two floors, both having full ceiling heights. Bedrooms at upper level. Number of square feet of upper level living area is greater than 70% of living area of lower level.

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Dwelling Type: Bi-level/Raised Ranch

Two floors. One usually four feet below grade level and the other one four feet above grade level. May be set on slight sloping terrain. If a garage is built-in, it generally would be located in the lower of the dwelling.

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Dwelling Type: Split level (Tri-level)

Usually having three separate levels and distinct living areas separated by different floor elevations. Grade level has foyer, family, and powder room. Second level has living, dining and kitchen. Third level has bedrooms.

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Dwelling Type: Town House or Row House

Two or more single-family dwellings connected by a common sidewall. Usually two or three story with the kitchen and living areas on the lower level and bedrooms on the upper floors.

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Dwelling Type: Duplex

Two-family house. Contains two separate single-family units in one dwelling. Each unit contains its own plumbing, electrical, baths, and kitchen -two of everything. Connected by a common sidewall - may have one or more floors.

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Step 2 -

Calculate the Floor Area

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Measure the TOTAL FLOOR SQUARE FOOT AREA. The dimensions of basement, attached garage, porch, etc., must be noted but not included in the TOTAL floor calculation. Exceptions:

1. Residences are calculated on the total floor square foot area, including built-in garages. Deduct the cost of the built-in garage.

2. Bi-level residences must include the total lower level area including the basement garage.

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Calculation example: TOTAL square foot area

Dwelling at (40’ X 25’) = 1,000 s.f. X 2 levels = 2,000 s.f.

The costs of the items listed below are given in the “Additional Features” section of this manual:

Garage: 2 car attached.

Porch: 20’ X 8’ = 160 square feet.

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Step 3 -

Select the kind of exterior construction that most nearly fits the definition.

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Class “A”•Masonry Block, Painted - An 8” concrete block wall, painted on the exterior.

•Stucco on Frame - Stucco applied over wire and paper or solid sheathing.

•Stucco on Masonry - Stucco applied over a masonry block wall.

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Class “B”•Aluminum Siding or Vinyl Siding - Lap or bevel aluminum or vinyl-coated siding laid either horizontally or vertically over the exterior wall.

•Asbestos Shingles - Asbestos shingles laid over a wood frame wall.

•Wood Siding - Lap or bevel wood siding laid either horizontally or vertically over the exterior wall.

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Class “C”•Adobe Brick -Solid - A soft brick formed from local clay, rough in shape and texture.

•Wood Shakes - Wood shakes laid in overlapping layers on the exterior wood frame.

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Class “D”•Brick Veneer - Face brick attached to a frame structure using corrugated clips. The brick provides ornamentation only and provides no structural support for the building.

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Class “E”•Solid Brick - Solid brick wall, typically two rows thick with each row grouted together, with face brick.

•Stone Veneer - Stone attached to a frame structure using corrugated clips. The stone provides ornamentation only and provides no structural support for the building. .

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Class “F”•Solid Stone - Solid stone wall with stone facing.

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Step - 6

Interior Finish Adjustment

The base cost in Step 4 contain the following finishes depending on the living area of the home.

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Refer to page 2046 for the Interior Finish Adjustment.

Option 1 = 750 - 1499 Walls: 100% paintFloors: 95% carpet, 5% vinyl

Option 2 = 1500 - 2099 Walls: 75% paint, 25% paperFloors: 90% carpet, 5% vinyl, 5% tile

Option 3 = 2100 - 3099 Walls: 50% paint, 25% paper, 20% panel, 5% tileFloors: 50% carpet, 10% tile, 40% parquet

Option 4 = 3100 - 3499 Walls: 35% paint, 30% panel, 10% tile, 25% grass clothFloors: 40% carpet, 15% tiel, 40% parquet, 5% slate


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Step - 7

Calculate Additional Features

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To the “Base Cost” developed in Step 5, add or deduct the costs for:

•Bathrooms

•Garage or Carport

•Fireplace

•Porch

•Breezeway

•Decks


•Central Air Conditioning

•Basement

•Other Miscellaneous Features such as:

•Alarms

•Garage Door Opener

•Jacuzzi/Hot tub etc..

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Calculate an estimated Replacement

Cost of a Dwelling using the

Estimated Replacement Cost Computerized System

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High Value Dwelling Replacement Cost

NOTE: High value homes include many features that are not standard in mainstreet home construction. The High Value Dwelling Replacement Guide is used for dwellings 3,500 square feet or more and generate a replacement cost between $300,000 to $750,000.

Homes submitted over $750,000 should be supported by a current replacement cost appraisal or a detailed contractor’s estimate of replacement cost.

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Review

Q: List the eight essential steps to determine the estimated

replacement cost of a dwelling:A: 1. Determine the Dwelling Type

2. Calculate the Floor Area3. Determine the type of Exterior Wall4. Calculate the Roofing-Type Adjustment5. Determine the Interior Finish Adjustment6. Calculate Additional Features

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Determine the estimated Replacement Cost for the following dwelling:

Dwelling Type: 2 story Private DwellingTotal Floor Area: 2,640Exterior Wall Type: 80% brick veneer, 20% wood frameYear Built: 1978Roofing: Asphalt ShingleInterior Finish: Option 2Additional Features: 2 1/2 baths

2 Car GarageOpen BreezewayDeck

Zip Code: 77478

Review

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Quote of the day..“In business, the competition will bite

you if you keep running; if you stand still,

they will swallow you.”

Semon Knudsen

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Property Module IV Replacement Cost Determination