Resolving My Insurance Company Home Premium Scam

Pacific Heights MansionIt’s been two weeks since I found out I was being scammed by my insurance company. I sent in my 8 month old house appraisal to Tricky Dick, who is trying to raise my home insurance premium by 45% since their inspection 7 months ago.  Their shady inspector made my house 50% larger than it really is, so they could raise my premiums by a similar magnitude.  It’s so easy to prove what my house’s square footage is, it’s not even funny.  It’s like saying Lebron James is 10 feet 5 inches instead of just 6 feet 8 inches tall.  Utterly ludicrous.

The recent appraisal I sent in contains perfectly drawn outlines of my house’s layout and square footage.  It matches up to within 50 square feet of what the SF County Assessor’s has on record.  I’ve had two other appraisals in the past 7 years, and both are also within 50 square feet of the real size.  Clearly, this case is as slam dunk as convicting Elliot Spitzer for messing around!  Not so!

If you’re curious, here’s the e-mail exchange I had with them with names, figures, and dollar amounts changed that mimic the same percentages.  All of this takes precious time.  In this post, you will learn what the tricky “Home Protector Insurance” product is.  You’ll also learn whether the rebuild cost premium you pay trumps the square footage size they have in their documents, and what you get to rebuild if your house blows up.

FIGHTING IT OUT WITH TRICKY DICK INSURANCE CO

Dear Sam,

If you can provide the breakdown of the square footage of your home from your appraisal when you recently refinanced your home, that would be great.  On the Tricky Dick inspection, it currently shows 3,000 total square feet (which is 50% greater than reality):  first floor: 1380; 2nd floor: 1500; 3rd floor: 120.

You may fax over the information if you prefer to:  1-800-XXX-XXXX

Thank you,

Tricky Dick Representative

MY RESPONSE:

Hi Tricky Dick Rep,

My house is officially 2,000 square feet of warranted living space based on the SF county records and a recent home appraisal.  Please rectify this major over assessment in the system. It makes me feel that there is fraud with Tricky Dick pushing the home inspector to overvalue my house so that Tricky Dick can charge a higher premium. The reason why I’ve been a customer for so long is because of Tricky Dick’s excellent reputation and service. I hope this is just one big oversight.

Please see the appraisal report which outlines on page 5/29 of the PDF the livable square footage of only 2,000sqft. On page 6/29, you can see them do the cost approach analysis of 2,000 X $375 build cost/sqft = $750,000 + $48,500 for the garage area = $798,500 TOTAL. $798,500 is basically inline with what I previously had with Tricky Dick.

The attached report is dated 7/2010 and therefore very recent. I have done nothing since 7/2010, which includes when the inspector came in 4Q2010.

I request that Tricky Dick not only credit me the months that I have been overcharged by the egregious 3,000sqft assessment, I also request that Tricky Dick  does something to compensate me for the 3+ hours I’ve spent digging up this detail, talking on the phone, following up, and writing this e-mail. Seriously Tricky Dick rep, I am very disturbed I could get a sudden 45% increase in my home premium after such an inspection. I have ~$XXX,000 in CDs with Tricky Dick and do my auto, valuable personal property, and rental  insurance with Tricky Dick.

Please make this right. Please also respond to this e-mail so that I know that you have received it.

Regards,

Sam

TRICKY DICK RESPONSE

Dear Sam,

Thank you for your email.  I will look into this information you provided me and I will get back with you next week.  Please know Tricky Dick  is a very reputable company since 1922 and we are not looking to purposely increase premiums.  It’s about insuring your home accurately so we can restore your home back to it’s original condition, should there be a loss.  We do not want to over insure your home, nor do we want to under-insure it either.  I will review this information with my manager and will be in touch with you.

We value your business and the opportunity to serve all your financial needs.

Thank you,

Tricky Dick Rep

TRICKY DICK RESPONSE ONE WEEK LATER

Dear Sam,

I just tried calling you about an hour ago on your cell phone but could not reach you, so I’m emailing you the response from the Inspection Department.  We received word from the Inspection Center about your home and they are changing the square footage to the 2,000 sq footage and recalculated your rebuilding cost to now be: $950,000. This would make your new premium: $2,000 per year (from $2,400, but was only $1,400).  There are a couple other options if you wanted to explore as well:  we could go as low as 95% of the rebuild cost ($905,000) which would make your premium: $1800.  Another option:  we could keep the rebuild cost at $950,000 and remove the Home Protector coverage.  The home protector coverage provides additional coverage if the amount of a covered loss exceeds your dwelling coverage limit because of increased building costs, building code changes, inflationary effects from material shortages or additional debris removal expenses.  If you decide with this option, your premium would change to: $1600.

We value your business and the opportunity to serve all your financial needs.

Thank you,

Tricky Dick Rep

MY RESPONSE

Dear Tricky Dick Rep,

Please clarify what my previous rebuild cost and annual premium is currently after the reassessment in February 2011, as well as the rebuild cost and annual premium was in 2010.

What does the rebuild cost encompass?

Regards,

Sam

TRICKY DICK RESPONSE

Dear Sam,

Your premium from 2/2010 thru 2/2011 was: $1400 and your dwelling rebuild cost was $730,000.  At renewal 2-28-11, your current rebuild cost is (from inspection): $1,120,000, and premium is currently $2,350.  Rebuild cost includes: current labor and building costs in your area, architect fees, debris removal, building permits, contractor fees, etc.

We value your business and the opportunity to serve all your financial needs.

Thank you,

Tricky Dick Rep

MY RESPONSE:

Thanks Tricky Dick Rep.

And to clarify, which trumps which? The rebuilding cost budget I have or the square footage? In other words, am I only allowed to rebuild up to 2,000 of livable square footage even if I only spent say $600,000 of the $950,000? Or, can I keep building until my $950,000 is used?

I’m assuming that I have the right to use up my entire rebuilding cost and build whatever size I want within reason since you guys have been charging me for it?  Does the rebuild cost consist of all the fixtures?

Also, just eyeballing these figures below, don’t you think it’s kind of ridiculous that my rebuild cost could ROCKET from $730,000 to $1,120,000. I do NOT have gold floors or diamond door knobs and my house has remained the same size.

Will Tricky Dick be crediting me the overcharge from Feb, March, April, and May? I hope so.

The square footage is what’s in dispute, but how much you are charging me is not. Hence, I should hope that I have the RIGHT to rebuild up to the coverage I am paying for (per my last e-mail, which hasn’t been responded to you), and not up to some seemingly arbitrary home square footage amount.

Please let me know.

Thanks,

Sam

INPUT COSTS ARE INCREDIBLE IMPORTANT TO UNDERSTAND

The Tricky Dick representative has been excellent at responding to all my questions and following up.  They have changed the square footage to the real size (33% correction), yet the rebuild cost only went down 15% instead of by 33%.  In other words, they still plan to charge me 13% more than what I’ve been paying for the past 6 years sans the “Home Protector Coverage” (this insurance for insurance is ridiculous) for my home insurance premiums.  If I were to add the Home Protector Coverage, my cost jumps 28%.

A 13% increase after 6 years is reasonable to me, given input costs have certainly increased by that amount in this time period.  A 28% increase seems on the egregious side.  However, if you just do the math and calculate a 5% inflation rate per year for 6 years, equals a 34% increase.  Since my rebuild coverage is going from $720,000 to $950,000 (32% increase), paying 13% more is a “good deal.” So all in all, I am fine with this rebuild cost increase because they’ve made an effort to adjust, and I clearly see where they are coming from now.

The main point of dispute has been my house’s square footage size and rebuild cost which relates to the size.  You should know that if your house ever gets destroyed, you have a right to rebuild your house to the maximum rebuild coverage you’ve been paying for, and not the disputed square footage size. In other words, you could build a house twice as large if the costs fit.

One thing to note regarding rebuilding costs is the implication for home prices.  With rebuilding costs forever rising with inflation, home prices will inevitably continue to rise, otherwise homebuilders will stop building because they won’t be able to make a margin.

Recommendations For Property Homeowners:

* Manage Your Finances In One Place: The best way to become financially independent and protect yourself is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing and how my net worth is progressing.

* Check Your Credit Score: Take a moment to check your free TransUnion credit score through GoFreeCredit.com, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance! The average credit score for rejected mortgage borrowers has risen to 729 due to more stringent lending requirements. Do you know what your score is?

* Refinance Your Mortgage. LendingTree Mortgage Refinance offers some of the lowest refinance rates because they have a huge network of lenders to provide mortgage loans, home equity loans, and home equity lines of credit. If you’re looking to buy a new home, consider using LendingTree to get multiple offer comparisons in a matter of minutes. When banks compete, you win.

Updated: 2Q2014

Best,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Untemplater says

    Wow sorry to hear you had to go through all that. Man insurance companies are so sneaky and scammy. They try to get away with anything because they know people need coverage. Glad you were able to catch them when you did. I’ve fought credit card fees before and my cable company when they charged me for a ton of bogus fees.

  2. says

    This experience would make me want to check the market. I just do not feel comfortable with the information and you definitely do not want to have fight when you have a claim.

  3. David M says

    Sam,

    Great work. If I ever need someone to fight at dispute for me – how much do you charge per hour? :)

    Thanks for the inspiration to perservere!

    David

    • Po'd with Insurance says

      My tricky Dick insurance company has doubled my premium in one calendar year. We have had no claims, no late payments, etc., etc.,

      Filed a complaint with the Board of Insurance. Tricky Dick’s in Cleveland sent a letter stating that they are now refusing to insure us.

      We are in a mess of it. What is going on with insurance companies this year?

  4. says

    I don’t understand why you are fighting so much with this particular company? Are their new (not old premiums) in line with competing companies? If Not, Leave them. If Yes, then do what is most convenient which is probably just pay their partially requested increases.

    If they are that off they are just telling you “We don’t want to insure your home any longer and this is how we are going to get out of it.”

    • says

      Partly bc I know I’m right and would reach a resolution. Partly bc it is a pain in the ass to switch, with no guarantee the other insurance company wot screw me. I find the initial battle a fun challenge. If I can come to a resolution in the first part, that’s good.

      And, if I can get 30% more rebuild coverage for a 12% in cost, then that is a win.

  5. says

    On fighting the good fight, I totally agree! I brought down my insurance (auto, not home) from 8xx to 3xx by fighting back!

    And do shy away from shopping around. Nothing gets these companies than hearing that you are looking for other options!

  6. Ann says

    I’ve been an insurance broker for over 20yrs, but in Canada. Although our two countries are so similiar in many ways, we seem to have vast differences in the financial areas, namely banking & insurance. When I sell home insurance it’s always with the home insured to Guaranteed Replacement Cost and replacement cost coverage for the contents. We have a program that brokers across Canada use to calculate the RC (replacement cost) of a house. It’s not difficult, takes the type of home (1 storey, 2 storey, bi-level, duplex, etc), the sq. ft of the entire house, we break it down into finished/unfinished, add in an attached garage, and a there are some more things too but you get the idea. The program is postal code driven (zip code for you guys) as certain areas of the country have more expensive construction costs & we also look at the area you live in too. If you’re living outside of a town, a contractor is going to add to his cost his daily commute to the work site for the labour & materials. Anyway, long & short of it, we come out with a rebuilding cost that includes the value for debris removal. Since I’ve been working in the business for years I have a good idea if the amount is accurate or not. Almost all the time it’s right in the ball park. Most companies will pay to have an independent appraiser come out & value high end home, over $750,000 -1mill. All of the companies we sell for (and it’s a lot) have clauses that if you have GRC on your home and you have a total loss, you get a brand new home built on your lot BUT it’s the same style and finished to the same degree as before the loss. So if you have a bungalow with an unfinished basement, that’s what you get. If you had lino & carpet, that’s what you get. However there’s always leeway that you can upgrade during the build and pay the difference to the contractor. That’s why we need to know what your home is like now and you need to let us know if you finish the basement, add a sunroom, etc.

    I guess what I’m trying to say is it bothers me when my profession gets dumped on. Insurance is what we call a “grudge purchase”. No one wants to buy it but if something happens it the best purchase you’ll have ever made. Like anything you need to shop around but your best bet is to find a broker or agent, and actually make a point of getting to know them and have them know you. In our day of instant, impersonal service there’s no connection between the seller and the buyer. Every time I work on a client’s file I know all about them, what they do, where they live, their kids, where they went on their last vacation, etc. (you’d be surprised what people tell me as I’m adding on a vehicle to their policy). I am their advocate to the insurance company and my first duty is to them. When something is wrong and I have to fight on their behalf, then I do. However, if the client is wrong then I let them know too. The good thing about our long relationship is that they trust that I’m telling them the truth, even when it’s difficult. Insurance is just “a promise to pay” and that’s really when the rubber hits the road and you see if you got what you paid for. And if you have a claim, that’s when your agent should be helping you through the process.

    So….that’s my vent. I feel bad that you got taken advantage of. You’re right, most people would have bitched about it but probably not have done anything or not known how to fix it. I would like to think that your situation was the exception. I know in our office (we’re one of over 90 locations), our company for that matter takes pride in making sure that our clients have the best coverage for their needs. At the end of the day insurance does two things and two things only. It pays for what you can’t afford to lose and buys you piece of mind. It’s my job to make sure you get both.

    • says

      Thanks for your thoughts. Peace of mind and disaster coverage indeed. I was totally happy with my coverage until they decides to jack my rate up by ~50%. I would be fine if they jacked up my rate with a proper explanation of WHY. But, when they main issue was my house size, that was just plain wrong.

      Insurance is a must, but not bad insurance.

  7. says

    That’s great to know that you get to build according to the total insurance coverage that you have, not according to the actual cost.

    That stinks that this was all such a time suck though! And your homeowner’s insurance is expensive, just like ours in Houston, TX (though yours is even more expensive). For comparison purposes, we pay insurance of $1790 + $250 in flood insurance for a 3,100 square foot home. My parents in PA pay much lower, like $400 for a 2,000 square foot home.

  8. says

    My new lawn mower that I only got 8 to 9 cuts out of broke. Of course I made sure I got a decent guarantee when I bought it…. When I called the dealer where I bought my lawn mower, they told me (over the phone) that it was a gas problem and that it wasn’t covered by the warranty. Well, I knew that it wasn’t a gas problem and started complaining. IT took about 1 hour to convince him to even look at it. Eventually the dealer took the lawn mower in and fix it for free. According to them, there was some brown stuff in the carburetor, but they didn’t blame the gas. I’m still not sure what it was, or if I totally believe them.

    I’m still pretty upset about the entire deal, but it doesn’t sounds anywhere near the pains that you had to go through!

    Ironically, the insurance company that insures my home is calling trying to get my car insurance on the same policy. Maybe the insurance companies are getting greedy?

  9. says

    This is small victory…based on principle and not on money. I was claiming a free gift of postcards from Uprinting with my lovely bird on them.

    When I looked at my Super Frugalette bird, she looked as if she had lost about 30 pounds. She lost her “curves” and looked emaciated. I called Uprinting and explained that my logo had been distorted.

    I promptly received a new set of postcards.

  10. Po'd with Insurance says

    I have something else to say about the homeowner’s insurance debaucle. It is my opinion that homeowner’s insurance should fall under the auspices of the Federal Fair Housing Act. If you have a mortgage you are required to have homeowner’s insurance. If you are a victim of price gouging, red lining or retaliation ( as in our case) and you are having difficulty finding fairly priced insurance, you could stand to be in default on your mortgage through no fault of your own. Insurance companies red line. They discriminate based upon your credit decisions, etc., etc., The industry is completely under regulated and is screwing decent people who pay their bills. And… they pass along discounts based upon discriminatory practices. I was told that if we foward them a copy of our college degrees, we would qualify for a discount. What? What’s next? The Good Christian discount? Social engineering abounds. Its disgusting.

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