We are in the process of buying a house in Red Hook, and are shopping for home insurance. The mortgage commitment requires “hazard insurance with extended coverage in an amount no less than $x” (x being our loan amount). The same paragraph states that “the amount of coverage need not be in excess of the replacement cost of the improvements on the property securing the loan.” (we are financing this with a 203K loan).

We have talked to several insurance agents here in Brooklyn, and the quotes we are getting are pretty high. The agents have all asked if the mortgage company will accept the “replacement cost” instead of the loan amount, and we are investigating that now. I guess I’m wondering if this all sounds standard? And also if anyone in Red Hook or the vicinity has a recommendation for an insurance agent who won’t comment on how difficult it will be to get a policy on a house “so close to the water”.

Thanks!


Comments

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  2. Replacement cost gives you “new for old”. Say your home was built 80 years ago and it has 5 inch mahogany moldings and solid wood mahogany doors, plaster and lath walls and mud job tiled bathrooms. In the event of a loss, your insurance company will pay to replace precisely what was destroyed. Today 5″ mahogany moldings and solid mahogany doors are custom items and cost much then what is commonly used in new construction i.e. 2-1/4″ inch molding and hollow core doors. This is the meaning of replacement, they replace exactly what was destroyed “new for old” with no adjustment for wear and tear.

    By law the lender must accept a replacement cost policy. The loan amount is irrelevant, you can purchase a home in Chelsea at a cost of 5 mil and get a 3 mil mortgage but the cost of replacement would only be 1 mil. What matters is what it cost to replace that which was damaged.

    If you have an older home, I would suggest you replacement cost since you will end up way ahead of the game in the event of a loss. I would also recommend an “all risk” policy. If you wish to save money, you can do so by increasing the deductible or eliminating the off premises theft rider.

    Insurance premiums vary greatly, so you need to shop around, also some carriers will give you a discount if your car is also insured through the same company.

    About flood insurance, there too it is best to shop around, the company that insures you for hazard may not give you the best quote for flood.

    You can check if your home is in a flood zone by going to the site below. Its best to wait and see if the mortgage company requires it. Bear in mind that it takes longer to get a flood policy then a hazard policy, so you need shop early.

    Good luck,

    http://www.msc.fema.gov/webapp/wcs/stores/servlet/FemaWelcomeView?storeId=10001&catalogId=10001&langId=-1

  3. Thanks to all for your comments. I was told, by the broker, that Dikeman Street in Red Hook is the flood line. We are just above Dikeman, so we thought we would dodge that particular issue. I will check the appraisal documentation.

    The replacement cost question is very confusing to me, but I appreciate the input.

  4. I had a very good experience with:

    Ellen Pittari
    Denis A Miller Insurance Agency Inc.
    60 West Park Avenue
    Long beach, New York 11561
    718-834-9512
    Jakelle822@aol.com

    It was a very reasonably priced travelers policy.

    I also spoke with this guy and think he was on the ball:

    Paul J Vinci, Regional Sales Director
    Otterstedt Insurance Agency
    540 Sylvan Ave Englewood Cliffs, NJ 07632
    Ph: 201-227-1800 Ext. 109
    Fax: 201-227-5021
    pvinci@otterstedt.com
    New York City Office: 620 W 42nd St.Suite S60B NY NY 10036

  5. We live in Red Hook and I was beginning to panic about insurance when I found Max Pollack, whose office is on Van Brunt. Our insurance includes flood coverage and is very cheap. I highly recommend going with your local broker!

  6. We are in Red Hook and yes, there are very few streets that will Not require flood insurance. Our Flood insurance is $1300 per year. They will not close on the house without it. We also had to insure for nearly the full value of the house, however our mortgage was much more than that.

    We’re with State Farm.

  7. On the more ambiguous issue of “so close to the water,” I had three houses insured with Chubb and they wouldn’t insure another one that was on Cape Cod because they only take in so many homes a year that are “near the water/shore”. The house was definitely not in a flood zone but that was their policy.

    I’ve since dropped Chubb.

  8. If you are in a flood zone FEMA (i know a joke) requires it. No bank will lend to you unless you have flood insurance. The lender will do a flood cert and let you know If they don’t require it you don’t have to get it.

  9. Not sure whether flood zone is a federal or state classification but there’s never any question as to whether or not you’re in one. Brokers never disclose it. It will appear on the appraisal.

    It doesn’t matter whether it’s flooded in the past year, the past 150 years or even never. I think when I had a mortgage in PA it was about $2,000 for about $150,000 of flood insurance, which was the size of the mortgage.