Read the episode transcript
Aaron (00:00)
Hello everybody, welcome to the Speaking of Insurance Podcast. My name is Aaron Bollinger, and today we're going to be talking about a big problem that not just contractors are having, but actual people in California in terms of their home insurance and their rebuilding cost, and how often it is that I, as an insurance broker, see that people's rebuilding estimates, their replacement cost, or their actual cash value are not properly set up. Welcome to Speaking of Insurance by Bollinsure. I want to start this off with a quick question. When you look
Aaron (00:30)
At your homeowner's insurance renewal, what do you look at first? The first thing that I would say the most people look at is their premium. But there's another number that's worth understanding before you decide whether that premium makes sense. And that's the amount of insurance on the home itself. What does that number represent? How is it calculated? And does the information behind it still describe your home accurately? Today we're going to be walking through five questions California homeowners can use.
Aaron (00:54)
To have a more useful conversation about their coverage or a more useful understanding. Whether you're in Westlake Village, Thousand Oaks, or elsewhere, I believe that anywhere in California is super important to start looking and understanding what you're comparing before you decide what to change, if to change. First, are you confusing the home price with its rebuilding cost? The amount you could sell your home for and the amount you need to rebuild it are two completely different numbers and questions you need to identify.
Aaron (01:24)
A real estate price reflects the property and its location, including the land. A rebuilding estimate focuses on just reconstructing the structure. That means a change in your home's value does not by itself tell you what should happen to the dwelling limit about or on your insurance. Instead of asking, does my policy match what my home is worth? I would ask what assumptions were used to estimate the cost of rebuilding this particular home, my home. That is a much better starting point for a coverage discussion.
Aaron (01:54)
I would like you to imagine a situation where you have a beautiful house. It's maybe a five million dollar house, or maybe it isn't, but let's just say it is. You have a five million dollar house and it's gorgeous, right on the lake of let's call it Westlake Village, something local. And you look at that house and you say, Wow, this is really nice. I'm gonna need a super high insurance amount on it. You go get a insurance policy for five million dollars because you ask your broker for that, and because your broker doesn't question you, and all of a sudden that premium is ridiculously high, but
Aaron (02:23)
You think it reflects the home's worth. You go look to rebuild it after a fire happens or after a claim happens. Turns out you only needed two and a half. Of course, the inverse can be true, and it is worse if it's the inverse, having too little insurance versus too much. But nonetheless, I would argue that paying the right amount for your insurance is the most important decision that you can make when you do have a house in terms of maintaining that house, maintaining its safety, just like with the auto insurance side as well.
Aaron (02:51)
Making sure that you are maintaining your vehicles, your clean driving record, and auto insurance with proper limits and hopefully an umbrella can be the difference between that home, that car, that driver being safe, being supported financially by an insurance company with your coverage limits versus not having anything. But back onto the home side.
Aaron (03:11)
The second question I would ask is, does the estimate describe the house you actually have? Think about what may have changed since the property information was collected.
Aaron (03:18)
Did you remodel the kitchen, update bathrooms, add living space? Maybe you put in new flooring, maybe you took out the carpet, maybe you replaced some basic finishes with more expensive materials, regardless of what it is. The replacement cost estimate is what your broker uses to determine the first dwelling coverage A, assuming that you are on replacement cost coverage. We're gonna talk about replacement cost versus actual cash value. It's important for all property insurance in California, and it's a big difference.
Aaron (03:44)
In terms of coverage and amount that you actually have to have an insurance and what you're actually covered for. A real estate price, again, is different from a home rebuilding cost. Another quick reminder right there. But a useful estimate needs useful and accurate information, reviewing the square footage, construction type, finishes, and other significant factors that are being used on your insurance. So in case something goes wrong, there is no discrepancy between the replacement cost estimate and what you're actually.
Aaron (04:13)
covered for on that dwelling a limit. And if there is a difference and there is something on the replacement cost estimate that was improperly added, maybe somebody inflated the square footage, maybe somebody deflated the square footage or said that the home was above average instead of custom made, all of a sudden when you look to rebuild that house, the replacement cost could be 50% to 100% less than what it needs to be in terms of relatively. So half of what it could be. Don't assume that the estimate is simply accurate because it appears on a renewal
Aaron (04:43)
Because some of the time insurance companies they say, hey, we've increased your dwelling coverage A. And this is because rebuilding costs are much higher. But odds are if your home is around 200 to 300 square feet to replace on their estimate side, it could very well be too low. We have a free tool on our website that a lot of people are using, the Bollinsure Replacement Cost Estimator, 2026. You can just search up replacement cost estimator in our family agency name, Bollinsure.
Aaron (05:10)
It's not a legal replacement cost estimator because that requires a bunch of different types of certifications, but it is a public one that we've created alongside contractor information that gives you a estimate to gauge whether or not your current replacement cost is around the right area. Of course, when you're making that final decision, make sure that your current coverage is used and determined by a actual replacement cost estimator, which we do have access to in-house. So we don't use the bull insurance replacement cost estimator directly in our agency. It's just a free tool that we've given to some people who.
Aaron (05:40)
might be able to determine that they're underinsured based off of it. So again, for changing your coverage, I would reach out to Bollinsure, reach out to me, reach out to some of our personal insurance risk management team and determine, hey, run this replacement cost estimator for me, a legit one, and we can do that for you as well. But compare your underlying information that was used for that replacement cost as well. If your broker comes back to you with replacement cost of 1.5 million, I would ask why.
Aaron (06:05)
If somebody says, listen, your current farmers policy has $1.2 million replacement cost estimate, we're coming back with 1.7. That's why our policy is more expensive. We feel like it's better reflective of your pop properties replacement cost. You can ask them what type of construction grade, what type of information and square footage did you put into that to get that? And please, a big part of this is keeping renovation records.
Aaron (06:28)
And documenting significant corrections with your insurance professional to make sure that that home is adequately insured or any property. It could be commercial property, same thing. The third question that I would ask is what replacement cost protection does the policy actually provide? Seeing the words replacement cost is not the end of the review. You should ask whether additional protection above the dwelling limit is included, how that protection is calculated, and what requirements and regulations apply on that. So let me explain. If your home is currently insured on a $1.2 million replacement cost basis,
Aaron (06:58)
That's amazing, right? Assuming that it's around the proper number. Odds are if a catastrophic event were to happen in the community that you live in, that contractors would have higher prices for the replacement of your home. And that's where something called extended replacement cost kicks in. It's usually a percentage of your dwelling coverage A, just adds twenty-five, fifty percent, sometimes even a hundred percent doubles your dwelling coverage A. And so making sure that that number is as high as it can be, or as you've discussed with your broker.
Aaron (07:29)
Again, it's extended. some of the time there are different things called like guaranteed replacement cost. That's usually a more grandfathered sort of idea. I think we've seen AAA have that past, where they just guarantee that your home's gonna be replaced pretty much. So getting an explanation of your policy wording can be the differentiator here in terms of you understanding what you're actually paying for on your insurance or your grandfather plan. guaranteed replacement cost sounds guaranteed, but I'm sure that the limitations apply. But
Aaron (07:56)
Also asking how the policy addresses changes required by current building codes, ordinance or law coverage. So this is a usually again a percentage of your dwelling coverage A, usually around 10%. And you want that coverage as high as possible because if you have to adhere to new ordinances or laws that come up for your reconstruction process, maybe your prior build wasn't proper, maybe you know, some new law came into effect and you know you're limited on what you can do.
Aaron (08:23)
in terms of building codes, I would one hundred percent add the ordinance or law coverage to any home insurance policy if you don't have it already. And so the point is not to like memorize all of this. Please don't. It's just like understand your limits and then the conditions and expenses that apply to it. a part of that's your broker's responsibility and making sure you have a broker who will walk you through those things is of course I like use I like to use the word crucial because it is crucial because
Aaron (08:48)
We have people contacting us who are paying tens of thousands of dollars a year for their insurance. And then people come to them and they're saying, you know, we've got this water supplement quote that's five grand cheaper. It's like, why would you take that risk? Why would you I mean, that's just an opinion. That's a professional opinion. Of course, if you opt for that lower premium, that's more than acceptable. But as a broker, it is never advisable to go to an insurance company that will offer you worse coverage unless of, you know, there's extenuating unless there's some other circumstances that
Aaron (09:17)
course come up and you have to save. I don't understand the premise of having a multi-million dollar home and paying tens of thousands of dollars a year and saving 10% on it to decrease your water coverage a substantial amount. So nonetheless I digress, that's a specific example of things that we have seen that we can see that do come up that are very important to distinguish between, hey, is this person advising me or is this person just trying to sell me a policy? Because if they're not distinguishing that that has a very low water sublimate,
Aaron (09:46)
And they're just trying to sneak that into the quote, then obviously that's not ideal and I wouldn't work with that person or that brokerage. But nonetheless, review your quotes, ask your broker if you see anything on the policy or on the quote indication, and make sure that you have an adequate understanding based off of what they tell you. This podcast isn't like legal advice, it's kind of just like me talking about insurance and ways that you can protect your assets better. Because that's what we've done as a family for decades. So on to the next one.
Aaron (10:14)
Fourth question is have you reviewed the expenses surrounding a covered loss? So rebuilding is just one part. There's debris removal and where are those provisions located, what limits and conditions apply to those limits, and then also temporary living arrangements like loss of use on the, you know, rental property side, you know, being able to pay for renting a home in the meanwhile, additional living expenses coverage for.
Aaron (10:41)
increase living costs as you have your home rebuilt. It's important to understand the applicable dollar limits and time limits as well, rather than just assuming that every expense for that rental home that you're going to be going and living in during your home being reconstructed will be reimbursed. So just like a practical question that you can go off of is if we couldn't live here after a covered loss, what would this policy provide and what would we need to document to get that coverage? If anything, maybe your insurance company is super chill and they're just like, you know
Aaron (11:11)
you just you can't live here, covered loss. Okay, we'll cover you. Companies like Chub can do that if you are on that higher net worth side, but you have to pay the premium price for premium insurance and premium risk and insurance. That's the truth. The last question that I would ask is, are you comparing the coverage or just the final premium? Please, please, please. If you are with somebody who's advising you to make a decision based off of the premium dollar amount, I would not make that decision.
Aaron (11:38)
That's where a lot of modern insurance brokerages and people are getting mixed up. They are allowing people to between proposals get, you know, little ins insinuations of this coverage is, you know, it's it's adequate. It might not be as good as this other coverage, but it's adequate. And so going through the pros and cons list with your broker of is this actually properly protecting my assets and what differences are in this policy can be the difference.
Aaron (12:08)
are the deductibles different? If you have to pay $10,000 with one in the event of a loss versus $50,000 in another, is that worth an extra grand a year? I would argue. I mean, again, you think about that, that would be once every 50 or 45 years between the $10,000 and $55,000 deductible. Once every 45 years, if you have to file a claim that's above $10,000, you would make your money back theoretically. Makes sense to me. But again, and also if a claims
Aaron (12:36)
around $50,000, would you want to file a claim? I personally would. I wouldn't want to file a $50,000, $100,000 claim. Obviously, it depends on the cost of the property, but being able to say, hey, I paid my $10,000 deductible and I got $40,000 of coverage versus, I didn't even go through the insurance company, I had to pay a $50,000 deductible. Could be negative. What endorsements, limitations, and exclusions deserve attention? Put the onus on your insurance broker for this. Put the onus on the insurance company that's quoting you for this. Companies get so
Aaron (13:05)
Swept under the radar in terms of their lists of exclusions, animal liability, water backup, water damage supplements, and what information remains outstanding for the underwriting process? Because a lot of insurance brokers in this modern world will just give you the indication that looks the lowest. And so a lower premium is 100% worth understanding, and also higher premium. Neither number by itself explains the whole insurance arrangement.
Aaron (13:29)
At Bollinsure, we review before we recommend. Sometimes the next step is to consider other available options. Sometimes it's to correct information or understand the current policy more clearly. A review does not have to begin with an assumption that you should switch insurers. Oftentimes, when we get people inquiring to work with us, we see that their incumbent, that is their current insurance company, is offering more competitive terms and coverage than their options that are outside on the market, alternatives. So
Aaron (13:58)
If I were you, I'd just pull out your declarations page, send it over to me, and say, what is my dwelling limit based on? And obviously I couldn't answer when was this information last reviewed, but what type of dwelling valuation should I be at? You can use our free home replacement cost estimator as an educational starting point. Again, it's not an appraisal, an insurance quote, or a binding determination of the coverage you need. Then you can bring those assumptions that come with that and your questions into a conversation with a licensed insurance broker.
Aaron (14:25)
You can visit our website, bollinsure B-O-L-L-I-N-S-U-R-E.com, call five six two Covwell, C O V W E L L, or email us at quotes at Bollinsure.com to discuss a coverage review.
Aaron (14:40)
I'm Aaron Bollinger. This has been Speaking of Insurance Podcast, brought to you by Bollinsure This episode is general educational information. Coverage depends on the issued policy, its terms and conditions, and individual circumstances. Don't change or cancel coverage based on a podcast alone. Reach out to me, reach out to some of our team. We'd be more than happy to guide you in terms of your insurance.
Aaron (14:58)
Thank you guys for listening. Hope you all have wonderful rest of your weekend.
