Real Estate

# Insurance - replacement cost calculation

• Last Updated:
• Feb 21st, 2021 8:22 am
SCORE
Aug 19, 2006
2169 posts
Mississauga

## Insurance - replacement cost calculation

I'm hoping insurance agents can provide some input on this scenario.
In the process of obtaining a quote for a property, I also run a couple of quotes on neighboring properties to get a comparison, and all of them (5-6 of them) on the street have a smaller replacement cost value (by around 80k), ultimately resulting in lower insurance premiums (by ~300\$/year?)
All of these properties on the street were built at the same time and are the same in terms of land, square footage, design, etc. There is nothing unusual about this property (no recent renovations, no additions, no pool)
So how is that the the insurance company thinks that the replacement cost of this property is the highest on the street ?

Could this be because there was a previous claim on the property which is now affecting their internal calculations ?
Could this be because the previous residents insured/declared something extra in the property (I cannot think of anything)
Could this be because this property is most recently sold for the highest \$ on the street ? (is the system even aware of this ?)

The CR agent can obviously not answer any of these questions because the system just spits out these numbers...

Thanks
5 replies
Member
Sep 10, 2010
403 posts
St Catharines
Perhaps the system programmer just bought some 2x4s?
Aug 19, 2006
2169 posts
Mississauga
bump
May 23, 2006
1709 posts
Vancouver
Is this for home insurance?

My understanding is replacement cost is something determined by the homeowner (not the insurance company)

You declare the replacement cost to insure against. Then, the underwriter would only insure against UP TO THAT amount.
Aug 19, 2006
2169 posts
Mississauga
Fantastical wrote: Is this for home insurance?

My understanding is replacement cost is something determined by the homeowner (not the insurance company)

You declare the replacement cost to insure against. Then, the underwriter would only insure against UP TO THAT amount.
I believe that is not the case in Ontario, thanks
Deal Fanatic
Dec 24, 2002
7190 posts
krypton wrote: I'm hoping insurance agents can provide some input on this scenario.
In the process of obtaining a quote for a property, I also run a couple of quotes on neighboring properties to get a comparison, and all of them (5-6 of them) on the street have a smaller replacement cost value (by around 80k), ultimately resulting in lower insurance premiums (by ~300\$/year?)
All of these properties on the street were built at the same time and are the same in terms of land, square footage, design, etc. There is nothing unusual about this property (no recent renovations, no additions, no pool)
So how is that the the insurance company thinks that the replacement cost of this property is the highest on the street ?

Could this be because there was a previous claim on the property which is now affecting their internal calculations ?
Could this be because the previous residents insured/declared something extra in the property (I cannot think of anything)
Could this be because this property is most recently sold for the highest \$ on the street ? (is the system even aware of this ?)

The CR agent can obviously not answer any of these questions because the system just spits out these numbers...

Thanks
I'm in the claims side of things not underwriting, but usually RC is a cost per sq foot for the building...plus for any additions like finished basement, upgrades in the house. It should generally be the same but possibly one firm is using an older rate and another a newer rate or their rating departments just have some inaccurate figures

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