1. Efftup

    Efftup Senior Member

    but even if he DID make an enormous £400 million profit on WTC 7, (which he didn't cos he chose to rebuild) that would still not be enough to offset the £4.5 BILLION loss he had from the other buildings he HAD to rebuild, so he still lost a LOT of money on the whole deal.
    The $400 million doesn't even cover 4 years of base rent on land that had no buildings to collect money from.
  2. marcus112

    marcus112 Member

    If larry hadn't rebuilt, then he would have profited from wtc#7,....is that your statement?
  3. benthamitemetric

    benthamitemetric Active Member

    marcus112, the WTC complex was a group of assets. When it was destroyed, Silverstein's company received insurance payments on various policies it had taken out on the assets in that group that it owned.

    The first fundamental question is whether (a)(i)the present value of those insurance payments at the time they were paid, less (ii) the ancillary losses suffered by Silverstein's company in connection with the attacks (in each case, taking into account inflation), was greater than (b) the present value of the assets destroyed at the moment immediately before the 9-11 attacks. It is really a very simple question.

    So can you tell us the present value of Silverstein Properties' WTC assets at 9:00 am on September 11, 2001? If not, you have a lot more work to do on your claim. Remember, of course, that these values have been heavily litigated in the years since the attack and so there is a substantial public record as to what they were. PACER will be your friend. Good luck and godspeed.

    EDIT: Here is a great article summarizing some of the major issues raised in the many insurance cases that were litigated as a result of 9-11: http://www.robinskaplan.com/~/media/pdfs/ten years after 9 11 property insurance lessons learned.pdf?la=en

    Note Section IX.B. in particular re replacement costs. Silverstein's company lost on its claim that its policies covered replacement costs and it is thus impossible for him to have broken even, let alone over-recovered.
    Last edited: Aug 17, 2016
  4. jaydeehess

    jaydeehess Senior Member

    The whole issue is somewhat ridiculous on it's face.
    Insurance companies tend to balk at paying out more than the worth of the infrastructure they are covering. They tend to balk at making people rich at their expense. Insurance is and always has been, intended to compensate the insured for actual losses incurred. If someone makes a claim beyond such losses, as seen by the insurance co. then they will, and indeed did in this case, go to court. In the court case that DID occur, L.S. lost!

    So,, IF L.S. "made out like a bandit" with the insurance claim funds he received then:
    a) The insurance companies were incompetent.
    b) The insurance companies were "in-on-it" too.
    c) Not sure what "c" is but don't want to set up any false dichotomy.
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  5. benthamitemetric

    benthamitemetric Active Member

    Moreover, if you actually read the SR INTERNATIONAL BUSINESS INSURANCE CO. LTD v. WORLD TRADE CENTER PROPERTIES, LLC, et al. line of cases, it becomes clear that there was no windfall issue. From the very beginning, the parties stipulated that the amount of loss was far in excess of the coverage. The main coverage issue was a very technical one dealing with whether under the correct interpretation of a certain standard provision (and one variation thereof) the insurers had to view 9-11 as two separate events, rather than one. And even in the most optimistic scenario for Silverstein re two occurences (and, no, he did not prevail on that claim against all insurers as one variation on the standard clause was deemed to not consider 9-11 as two separate occurrences), there was never any hint that anyone thought he was getting a windfall. Moreover, there is no evidence that any of the proceeds he received were a result of his fraud. There were literally thousands of the best lawyers in the world looking at these cases with a microscope for over ten years. Their arguments, expert investigations, and claims are all public record. No where did anyone allege that Silverstein committed fraud of any kind, let alone took down his buildings or conspired with others to take them down. With billions and billions of dollars on the line, litigious insurers did not allege misconduct by Silverstein. It's only those who are completely ignorant of these litigations and the tens of thousands of hours that went into them who make such claims. I guarantee you that there is simply no more thorough investigation than Wachtel and Skadden investigating in an adversarial environment with billions on the line.
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  6. benthamitemetric

    benthamitemetric Active Member

    To close the loop on this, I did some more digging myself using the litigation case files.

    Ultimately, the actual value of the lost property was left to a private Appraisal Panel, which was established by six of the insurers, and the methodology employed by which was subject to appeals to the district court hearing the case. Here is a pretty informative yet non-technical account of their proceedings:


    Since the appraisal panel functioned largely as a private arbitration, its proceedings themselves and its final determination remain confidential; however, a careful look at the record provides some clues as to where their determination landed.

    The two attached documents are extracted form the docket of the SR Int'l Bus. Ins. case. They consist of a declaration and attachments thereto. In the second to last page of the second document, which contains attachments, you can find an excerpt from Silverstein Properties' claims from early on in 2002. At that time, Silverstein Properties was arguing that the total loss of the properties by itself (not including WTC 7) had amounted to $5.634 billion, and that lost business/rental value had already amounted to $671 million. (Neither of these figures includes clean-up or other ancillary costs incurred by Silverstein or the replacement cost of the towers or other buildings.) If we just extrapolate these figures out to take into account continued business losses going forward until the time of the final settlement in 2007, however, we are already at $9 billion in losses, not including clean-up and other ancillary losses or replacement costs or inflation.

    As we know, Silverstein only wound up receiving $4.6 billion from its insurers for the losses (including the reduced $700 million in replacement costs), and he was obligated to pay to rebuild per his Port Authority lease. Estimates for the reconstruction costs all in run around $7 billion.

    The port authority and various government agencies involved in clean-up and rebuilding may have ultimately ate some of the costs otherwise incurred by Silverstein Properties, but it looks like there was at least a $10+ billion loss to Silverstein Properties at the end of the day (and note the above does not take into account that, even at the time of the final insurance payments, One World Trade was not yet built and remained unoccupied until just last year, meaning Silverstein Properties was technically still losing business on some lost office space through that time).

    Maybe Truthers will start calling him Unlucky Larry, as has always been more apt given that massive death, destruction, and loss were all thrust upon him suddenly by a group of madmen. To think he had to navigate all of that, all of the insurers, reinsurers, government agencies, etc., as well as harassment and defamation from Truthers, and he still managed to build an incredible new complex. NYC is lucky we had him in a position to use his expertise and Truthers should be embarrassed for shamelessly defaming him without even checking the available record.

    Attached Files:

    Last edited: Aug 18, 2016
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  7. marcus112

    marcus112 Member

    The value of the twin towers was 3.2 billion dollars. That's the amount of the 99 year lease taken out by Larry Silverstein and a partner. The value of WTC#7 was 386 million dollars. That's the total amount that Silverstein invested in WTC#7. the insurance payout was 861 million$,.......netting Mr. Silverstein a tidy profit of 475 million$. The 4.55 billion$ payout for the remaining WTC complex resulted in a profit of 1.35 billion$ for Mr. Silverstein and his partner. Mr. Silverstein invested only 14 million$ out of pocket for the 99 year lease and the purchase of WTC #7. the original total investment of 125 million$ by Mr. Silverstein and his partner for the 99 year lease was refunded to them in full by the port authority after the 9/11 incident.
    When considering whether Mr. Silverstein made a profit or took a loss, some refer to the cost of rebuilding. They note that the insurance payout wasn't nearly enough to cover the cost to rebuild. That's an unrelated argument, simply because whatever the cost to rebuild, the fact is that Mr. Silverstein realized a profit of 1.825 billion dollars as a result of insurance payouts. The buildings weren't owned outright by Mr. Silverstein,........as I previously stated, he had only 14 million$ invested personally. The insurance payout was enough to satisfy the mortgage on WTC#7 and the balance due on the 99 year lease on the remaining buildings in the complex, leaving Mr. Silverstein a profit of 1.825 billion. A portion of that has to be given to the partner in the 99 year lease, but Mr. Silverstein made a huge profit nonetheless.
    Mr. Silverstein may have reinvested that 1.825 billion( or whatever his share of that amount was ), which means he no longer has that much cash profit. Rather, he has that much equity in the new buildings. Either way, Mr. Silverstein began by investing 14 million$ of his own money and ended up with far more than a billion$ ................no matter how you slice it,........he came up a big winner.
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  8. jaydeehess

    jaydeehess Senior Member

    You will need to flesh that out better. If I lease a car for three years is the car worth what I would be paying over those three years? Do I insure it for that amount?
    Of course with cars we insure for depreciated replacement value. With building we insure for new replacement value. We also insure for loss of income.

    ,,and again how does the amount he invested corresspond to the replacement value of the structure of WTC7 and income derived from it?

    Your arithmetic may be correct but I don't see that you are using numbers that make any sense at all.
    What??? Of course you count the cost of rebuilding. You think that cost magically disappears or that time stops once the payout comes in? Please explain to me exactly why L.S. did not have to pay for rebuilding.
    In fact, normally if you choose not to rebuild, which iirc was not even an option under the lease agrement, then insurance does not give you replacement costs.
    Last edited: Oct 4, 2016
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  9. SR1419

    SR1419 Senior Member

    You also need to calculate the opportunity costs/lost revenue of having no revenue generating buildings for over a decade...all the lost monies that would have been collected had buildings remained standing.
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  10. jaydeehess

    jaydeehess Senior Member

    Not counting the cost of rebuilding is like not counting the cost of your mortgage when determining how much money you get to keep from your paycheque.
  11. benthamitemetric

    benthamitemetric Active Member

    Your analysis misses the mark completely as it relies on both misconstruing the public record re the lease and inexplicably ignoring, among other things, a $7 billion dollar cost incurred directly by Silverstein. Here are just a couple of the obvious things you get wrong:

    1. The $3.2 billion figure was the value of the WTC lease to the Port Authority, not to Silverstein. It is the wrong figure to use as the baseline for extrapolating Silverstein's losses. (See here.) I looked through the actual court filings and provided you an estimate of Silverstein's actual losses, as were submitted to the court under penalty of perjury by Silverstein.

    2. As I have already pointed out the lease obligated Silverstein to rebuild. That obligation was negotiated directly into the lease. As I also pointed out, this has been litigated to death by the best lawyers in the world. There is no basis for ignoring the cost of rebuilding in the context of determining the economic impact of the destruction of the towers on Silverstein.

    3. You still do not consider all of the other losses (legal, clean-up, etc.) incurred by Silverstein.
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  12. marcus112

    marcus112 Member

    Larry had to rebuild, after calculating the amount invested versus the amount paid out,...... he realized 1.3 billion$ profit. The record shows the lease was 3.25 billion$. I didn't misconstrue it,...you did. Larry's valuation of the building, presented to court under penalty of perjury,.... is an estimate made by the owner. The owner can't dictate the value of the property, and he can't be charged with perjury for providing an opinion of the value.
    I don't include the cost of clean up because you haven't proven that larry paid for it. That's because he didn't pay for it. If i'm wrong, show proof. By the way, you didn't add for the sale of the steel and other items sold. It's strange that you knew about clean up costs but profit from selling the steel slipped your mind.
    Trying to claim a loss for future lost profits is absurd. you can't assume profit and he did nothing to earn the money.did larry predict if he would have made a profit or incurred a loss? You can't assume profit,...therefore you can't get paid for it. Projecting profit is fun but nobody has to pay for guess work. Also,.......you can't expect to be reimbursed if you did no work .
    Finally,....larry's claim that the attack was actually 2 separate attacks is an example of greed unheard of in human history. i'll prove my point; in all the years since the 9/11 incident, have you heard anyone except larry say we had 2 attacks on9/11/01? please provide evidence where others routinely say we had 2 separate attacks that day. Larry is the only person that said that, and he's the only person collecting insurance from it. In the minds of most, larry's opinion would appear to be self-serving and invalid.
    Larry tried to use semantics to get a double payout. If you were the insurer, are you saying that you would agree to pay Larry double ? My personal opinion is that Larry should be ashamed of himself. you guys defending him is agenda driven, everyone knows that. If my comments are too harsh for you, if I've strayed beyond the parameters of your little rules,...then take my comments down. I ask you,...look in the mirror when you go home. Look into your own eyes. What do you see? Will you be comfortable looking into the eyes of God? If Jesus Christ appeared at your side, would you tell him that larry lost money from the attacks on 9/11?
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  13. benthamitemetric

    benthamitemetric Active Member

    The number of events issue was litigated to death. For some insurance agreements, the events of Sept. 11 were construed as two distinct events and Silverstein was entitled to two separate claims, and for others (most) only one claim was allowed. Have you even bothered to read any of the court cases where this was hashed out over ten years in excruciating detail? You know the insurers never alleged any fraud by Silverstein, right? You know they also never alleged he was getting an insurance windfall, which would have been a defense to their obligation to pay in NY. Why do you think the insurers never alleged as much and instead paid out what they were ordered to? Many were foreign insurers and reinsurers, not even American companies, by the way.

    On your point on the economic value of the lease, does it really make sense to you that the economic value of the lease to Silverstein was exactly equal to the payments he made under the lease to the port authority? You can't really think that makes any sense.
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  14. jaydeehess

    jaydeehess Senior Member

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  15. jaydeehess

    jaydeehess Senior Member

    Why are you arguing a point that has already been litigated?

    As for how many attacks? There were 4.
    The Fitterman building was torn down due to extensive damages suffered when it got smacked by WTC7. It suffered no "attack" yet the owners would have filed a claim.

    Silverman actually had a case. If only WTC2 had been hit, then WTC7 would have suffered only south facade damage woukd not have had massive fires and probably would have been repairable. It was a write off because of the separate attack on WTC1.

    However, most court cases determined these were both part of a single coordinated planbed attack.
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  16. benthamitemetric

    benthamitemetric Active Member

    I was thinking about this again this morning on the subway and I realize I may have been a bit glib in my last response, so let me elaborate on why the $3.2 billion figure cannot be the correct baseline for measuring Silverstein's damages. As noted in the article I previously linked above, the $3.2 billion was the present value of the 99 year lease to the Port Authority, the bistate governmental agency that owned the property and towers outright. This lease was not a typical commercial lease, however (the term alone tells you that); rather, this lease was part of the Port Authority's efforts to monetize its real property assets while removing itself from the risks of property management in a competitive real estate market. We see this in how the risks of the property were shifted by the lease to Silverstein. It was Silverstein, and not the Port Authority, that was responsible for the insurance on, maintenance of, and even replacement of buildings and fixtures on, the property. As such, we can expect that Silverstein was not paying to the Port Authority anywhere near the actual gross income the property generated as Silverstein would need to cover basically all expenses related to the property plus make the rent payments before he could start making a profit. At a first approximation, then, the correct baseline for the damages incurred by Silverstein is the value of the gross revenue that would have been generated by property from Sept 11, 2001 to the present plus the costs incurred by Silverstein for the contingent liabilities of rebuilding the site, dealing with tenant and other litigant claims, etc. minus the gross revenues actually generated by the property from Sept 11, 2001 to the present.

    Instead of insisting on using a value that is clearly wrong as your baseline, you should look to the court cases where serious people actually put forth serious estimates that are much closer to the truth of the damages. Even now, One World Trade Center is still generating a net loss due to low occupancy by the way (while other buildings at the site are profitable), so these are obviously complicated questions involving multiple variables.
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  17. marcus112

    marcus112 Member

  18. jaydeehess

    jaydeehess Senior Member

    Marcus, did you intend you simply reiterate benthamitemetric's post or just forget to include your own thoughts?
  19. marcus112

    marcus112 Member

    Insurance companies don't balk at the amount they have to pay on a claim. That amount is established when the policy is bought. You can insure the property above the fair value if you choose to, but the lender or in this case, leaseholder will insist on at least enough coverage to satisfy their estimated value of the property. Insurance companies make money by selling insurance. The higher the policy purchased, the more profit they make. They encourage over insuring a property because they make more profit. The exception is when they have to pay out on that higher insured amount, but it's all part of the overall profit/loss scenario. They understand they will be paying losses on a given number of policies. The fact is, the higher each property is insured for, as well as a higher number of policies, raise profits for the insurer.
    Your claim makes it appear as if the amount paid out is negotiated after the fact,.... left ambiguous until a loss occurs. that would be a disaster. The insured amount is established by the amount of the policy taken out. If both sides agree to a given amount, then they have a contract.
    Insurers automatically offer to insure a house for replacement cost. In my opinion, that's a scam run by them. Why would they insist on replacement cost, which is usually 50 to 100% more than fair value of the house? Their logic is that it costs much more to rebuild so you should insure for the cost to rebuild. That's their way of selling much more insurance to each client. The average homeowner doesn't rebuild. Insurance companies know that, but they lure customers into buying a higher 'replacement cost' policy by telling them how much they will receive if the property incurs a total loss. They're in effect, selling you a lottery ticket. The customer is, in effect, gambling that their house will burn down or a tornado or flood will destroy it. You're betting that a disaster strikes, which you don't want to happen to begin with. The odds are greatly in their favor that nothing will happen, thus they keep your policy payment, which is much higher because they convinced you to insure it for replacement cost. If disaster strikes, the average homeowner only needs enough to cover fair value. They can then look around and purchase another home for with a similar value as the previous one, and they lose nothing.
    I own several properties and insure each for fair value. I've never had a significant loss, and I've saved 1000's of dollars on insurance payments over the years.
  20. marcus112

    marcus112 Member

    I disagree. The value I set is based on fact. that's the amount agreed upon by the two parties that very recently entered into an agreement, in an open market auction. They established property fair value by that agreement. There is no better method of establishing value. the seller may say the property is worth 1 million$, for example, and a prospective buyer may say it's only worth a half of a million$. Their opinions are meaningless. When a sale occurs, it's not just talk. each side has made a decision that's contractual. If the property was worth more, why didn't anyone bid higher? If worth less, why did Larry Silverstein bid so much?
    The 'serious' individuals that made serious valuations in the court documents could only have been estimates. either side or the attorneys for either side cam put any valuation they choose. their opinions areobviously biased and
    The loss of revenue you're referring to isn't a given. how do you know that a profit was being realized each month? it's likely, with a half vacant building, that he was losing money. Silverstein would have a hard time expecting to claim loss of revenue since he owned the property only 2 months. how do you expect to claim a loss when you did nothing? once the properties were destroyed, he didn't have the responsibilities of renting and all other things, so why would he declare a loss?
    The cost to rebuild isn't a factor at all. that's not coming from Larry's pocket. he can invest personal money into the rebuild, and would have that amount of equity in the property. the majority is borrowed money, he only has to make a monthly payment, the same as he did before the event. the only factors involved when determining Larry's net gain or loss after the insurance payout is how much did he invest personally and how much did he have left over after satisfying his contracts with each building lender/lease holder. Those amounts were 3.235 billion$ for the complex and 400 million$ for WTC#7. That adds up to 3.635 billion$. Mr Silverstein collected 4.55 billion$ for the complex and 865 million$ for WTC#7. That adds up to 5.415 billion$ total insurance payout. the difference between debt and insurance payout collected therefore,. would be a gain of 1.780 billion$ for Mr Silverstein. a portion of that is owed to his partner for his share of the percentage he invested in of the complex. estimating that to be about 600,000 $, that would leave Mr Silverstein a tidy profit of 1.18 billion$.
    There would be peripheral costs, but they would balance out somewhat. for example, you list what you consider expenses that he would be liable for, but you fail to mention the sale of the steel from the buildings. we know the steel was sold, but not the amount sold for. also, the port authority refunded the 15 million$ that Larry initially invested out of pocket, you didn't mention that either. Those 'extra's would have to be calculated, but if the result was a loss to Mr Silverstein, the amount would be miniscule when compared to the 1.78 billion$ net gain realized by Mr Silverstein and partner.
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  21. marcus112

    marcus112 Member

    in this c
    ase, most cases being considered a singleattack means that some were considered multiple attacks. those cases, added about 1.4 billion
  22. Keith Beachy

    Keith Beachy Active Member

    No matter what the pay out, gain or loss. It is not logical/rational "fact" to support the crazy CT claims about 9/11. The CT claims linking Silverstein to inside job are nonsense.
    Insurance companies don't balk, they may be picky about paying out, they have investors, want profits.
    They are skeptical... like these insurance adjustors.

    Source: https://www.youtube.com/watch?v=Lw1UFeHIrq0

    Source: https://www.youtube.com/watch?v=3NOv8Ty0mbs

    I don't recall profit when my car was totaled.
    Do you have sources for your information posted today? Is this opinion, fact, speculation or reasoned research?
    Last edited: Nov 21, 2016
  23. benthamitemetric

    benthamitemetric Active Member

    There is a lot here, but, again, it's starting from a completely flawed premise. The $3.2 billion was not the value of the property to Silverstein. It was the net present value of the amount Silverstein had to pay to the port authority for the right to manage the property and draw income from it. As I pointed out, it is impossible that such a figure was the value of the property to Silverstein because it was only one of many liabilities Silverstein held related to the property.

    And your point about whether rebuilding was done by Larry personally is disingenuous. We use Silverstein as a shorthand for his companies in all cases in this conversation. Silverstein himself was not a party to any of the fundamental contracts at issue in any of the major litigations re the operation of the wtc properties. Your attribution to Silverstein himself of the insurance payments but refusal to attribute to him the costs associated with the property doesn't make any sense. We can drop using Silverstein as a shorthand if you'd like and just talk about his companies directly; however, by bringing it up, you do highlight an important issue: you have no idea what the owernship and waterfall was within the Silverstein companies and so, even in the counterfactual scenario where you think his companies profited from the insurance payments, you have no idea how much he (as opposed to other stakeholders or creditors) profited, if at all.

    Moreover, what you wrote above re insurance is just nonsense. Complex insurance contracts often give themselves to competing interpretations. As you are well-aware, several of the contracts in this case had a major ambiguity re the number of incidents the attacks would be construed as under their terms, and there were over 10 years of litigation regarding such issues and hundreds of others. Insurance companies and their lawyers are not leaving anything on the table when it comes to protecting their shareholders from unwarranted payouts. To think otherwise is just nonsense you are making up in your head to rationalize the fact that none of the dozens of insurers or reinsurers in the many cases involved the WTC insurance raised arguments that support your nonsensical beliefs (which, per the above, are clearly based on faulty premises).

    Your arguments only live on through your insistence on a false premise and refusal to actually read the many court documents that contain the exact answers you claim to seek re the economics of the insurance payments. You cannot hand wave away that (1) we do have an estimate the costs incurred by Silverstein, (2) the insurance companies raised no argument that there was ever any windfall payable to Silverstein (in light of such estimate or in the eyes of the plaintiffs whom you, without any evidence, imply disagreed with that estimate), and (3) your alternative figure--the $3.2 billion--is clearly and unequivically wrong (and substantially less than the value of the property to Silvertein, which is exactly consistent with the court record re points (1) and (2)).
  24. Ray Von Geezer

    Ray Von Geezer Senior Member

    Aren't these two sections contradictory?

    In the first, your claim appears to be that insurers don't balk at paying out the full amount covered by the policy because that's what the premium was calculated on. In the second you appear to be saying that insurers like to sell policies for inflated amounts to increase the premium on the basis they're unlikely to have to pay out that amount because odds are they'll only have to pay "fair value".

    The reason insurers use loss adjusters is because insurance policies typically (agreed value and similar excepted) recompense only actual losses, not the maximum amount insured for. From my experience of both working within, and being on the "sharp end of" dealing with, insurance companies, your second claim is closer to the reality, so I'd be interested to see evidence of insurers commonly paying out the insured value rather than the loss.

    Ray Von
  25. marcus112

    marcus112 Member

    My last two comments don't contradict each other. You've misunderstood my statement. I said the insurers like to sell policies for the highest amount of coverage possible, regardless of actual fair value of the property. They don't worry about having to payout that higher amount when a claim is made, not because they only have to pay fair value, rather, because they know the number of claims made overall versus the number of policies sold is in their favor. That's the basics of the business.
    They know, for example, if they sell 1000 policies overall, what the average number of claims that will be generated from that number of policies. They set their premiums based on that historical knowledge, guaranteeing a profit for the company. If they sell each of the 1000 customers an average of 1 million$ of coverage, their profits would be proportionate to that figure. If they sell 1000 policies but manage to convince each customer to insure for 1.5 million$, for example, then they will earn a greater profit based on higher premiums paid by clients for a higher amount of coverage.
    Customers are lured into that arrangement because they're excited about receiving a larger payout if total loss occurs, but it's a bad gamble. It's a losing bet for the customer because the insurer makes profit proportionate to dollar amount of coverage sold. If they sell each customer a higher policy amount, they in turn make a larger profit. It's no different than selling anything else; the more you sell the greater the profit,...................a very simple principle that every business benefits from. Most customers are willing to pay higher premiums thinking of the higher potential payout if a loss occurs. The odds are in the insurers favor however,..........you're playing against the house, the same as in Las Vegas.
    You indicated adjustors are used because insurers only want to pay fair value loss, but adjustors are only used to determine the percentage of property loss incurred. They have nothing to do with paying out fair value, that's agreed to when the policy is initiated. If a total loss occurs, an adjustor reports to his company that the loss was indeed a total loss, then the insurer has to pay the amount of the policy that was established when the policy was written. Otherwise, why would anyone agree to insure above fair value and pay higher premiums for that higher amount of coverage, if the insurer argues they will only pay fair value when a total loss is suffered?
  26. Hierophant

    Hierophant Member

    So you honestly think that there are insurance companies that will lure me into insuring my Peugeot 207 for half a million dollars hoping to make a profit, and then actually pay that money when it gets totaled under mysterious circumstances 6 weeks after I signed the deal? Seriously? Honestly? Really?
    Last edited: Jan 12, 2017
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  27. Hevach

    Hevach Senior Member

    It doesn't even have to be mysterious circumstances or so soon. I've dealt with a total loss, and the shenanigans are actually pretty incredible. Initially the payment was authorized for 25% of the total loss value on the plan, because I still owned the undeveloped land under the house, as well as an intact foundation and basement that would only require a few thousand dollars to repair before a new house was placed on top of it. On dispute (because the land and foundation are not 75% of the value of the house and its contents) the second offer was 75% for the same reason. It took a lawsuit AND signing over the hole in the ground to get 90%.
  28. jaydeehess

    jaydeehess Senior Member

    no, just no.
    Insurance will cover ONLY incurred loss.
    They will recommend that you insure your house and contents for more than present replacement costs because the costs will increase over time. Yes you could insure for bare minimum and revisit the amount every year but if during the year the cost of materials goes up you are SoL.
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  29. Hevach

    Hevach Senior Member

    You can also incur losses or liabilities greater than the value of the insured property.
  30. marcus112

    marcus112 Member

    We're discussing real estate. I've not mentioned anything other than real estate. Your Peugeot has nothing to do with the subject.
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  31. marcus112

    marcus112 Member

    That's not correct. The replacement cost policy they try to sell you is for an amount that's about double the value of your current property in most cases. You think it's wise to pay double premiums for twice the coverage necessary, because the property value may double in about 25 years?
    Insurers sell higher replacement cost policies to maximize profits. The lender and homeowner are at risk, so they have a concern. Why does an insurer insist upon a double value policy if they have nothing at risk? It's simple; because they want to make more profit.
    They're selling you more insurance than you need. the vast majority of total loss payouts don't result in a customer rebuilding a new house. most houses are less than new, so the value is less than new house value. The purpose of insurance is to guarantee that investors don't lose money if there's a loss.
    A homeowner living in an average house only needs to collect enough to cover his initial down payment plus the amount put up by a lender. Everyone gets their initial investment back, and the homeowner usually buys another similarly priced home in a similar neighborhood. The fact is, people living in an average neighborhood with $100,000 home values don't build a new home for $200000 after a total loss.
    If someone is living in a $100,000 house,..... it's likely that's the limit they can afford based on income and other factors. The insurer wants a person with a $100000 home to purchase a $200,000 policy,...... even though the policy holder can't afford the payments on a $200000 house. A $200,000 house will have higher property taxes and would necessitate buying an expensive lot in a new area. Therefore, it's not practical to buy insurance for more than the total amount that was invested by the lender and buyer combined, and insurers know that but don't care. Insurers have one goal; make more money.
    The sole purpose of insurance is to guarantee all investors in the property a return of their investment if a loss occurs. Insurance by definition means to guarantee to cover the amount invested in the case of a loss,... so that nobody loses on their investment. Paying for double the amount invested is not less than gambling. You're paying higher monthly payments, hoping you suffer a total loss so you can collect a double value payout. In essence,.... you're hoping that a disaster strikes and disrupts your life and health possibly. If that doesn't sound right, then tell me why anyone buys a policy for more than the amount invested.
    Insurance is a cost for the property owner. The hope is to never need to make a claim. Paying for a higher policy amount translates into a higher cost for the homeowner. The vast majority of property owners never collect a total loss amount, therefore the vast majority are paying for double coverage so that the insurer can take your money.
    • Disagree Disagree x 1
  32. jaydeehess

    jaydeehess Senior Member

    • Agree Agree x 1
  33. jaydeehess

    jaydeehess Senior Member

    You insure for more in order to not incur out of pocket expenses. If your home AND contents replacement cost is $100,000 and you but $100,000 worth of insurance, and incur total loss, BUT it ends up costing $110,000 , too bad so sad, the extra $10K is up to you?

    You will note in the link I gave, that if you choose not to rebuild on the same lot, that you will receive a settlement based on the depreciated value of your home, NOT the rebuilding cost.

    BTW, I sold my first house 7 years after I bought it and realised a 40% capital gain.
  34. jaydeehess

    jaydeehess Senior Member

    Just in case, I also checked State Farm, USA. For home insurance they specifically state to insure for at least 100% of the cost to rebuild.
    It also offers contents and personal property insurance.

    It states that you are covered for the cost of REBUILDING on the same lot. Not your mortgage balance, not the retail value of your house, not the cost of buying an equivalent house elsewhere.
    • Agree Agree x 1
  35. marcus112

    marcus112 Member

    You proved my point, thank you. State farm wants to insure for the cost to rebuild. That's my argument; they're trying to sell more than you need. They don't ask you're opinion, just tell you how much insurance you must buy. Why do they determine how much insurance a customer wants? No other business tells the customer how much of their product to purchase.
    As I said before,.......most people don't rebuild. Therefore, the cost to rebuild is a trick to get you to buy more insurance than you need. The average person needs enough to cover the total investment. Then,......your even, gaining nothing, losing nothing. Years later if the value increases an adjustment can be made, so that's not an issue. I'm talking about paying premiums from the beginning of coverage on a higher amount of insurance that's not needed. why is it their practice to insist on replacement cost? They know most don't rebuild, and if someone wishes to rebuild they could choose more coverage. The insurer doesn't ask or give that option. They quote you a dollar amount of coverage based on rebuilding.
    That's a scam in my opinion, unless they carefully explain replacement cost and give the customer an option. They don't however. Just as they told you, replacement cost with no option,..........but why?
    Rebuilding on the same lot isn't realistic unless you have a new, or nearly new home. In an older neighborhood with $100,000 houses, you would be foolish to rebuild at a cost of about $200,000. The value of your new $200,000 house would suffer because your in a $100,000 neighborhood. Therefore, another reason that buying a policy for replacement cost is not necessary and foolish
  36. jaydeehess

    jaydeehess Senior Member

    They implore customers to insure for replacement costs. They do not DEMAND that you do so. If you want you can insure your house for 50% of rebuilding costs, and not bother with insurance for contents. THAT IS UP TO YOU.

    Sorry, did you have stats to back that up? I don't recall.

    You can purchase mortgage insurance from your mortgage company.
    You CAN do that.

    You can do that.
    You have the choice. Replacement cost is their recommendation.
    AND, inform you that if you choose not to rebuild on the same lot that you will receive a settlement based on the depreciated value of the house itself. You can sell the lot as you wish. They don't insure the cost of the plot of land. Why would they?


    If you have insured for replacement cost then rebuilding on the same lot will cost you nothing out of pocket. If it costs $200,000 to rebuild then ok, you have a brand new house in an older neighbourhood. What's the beef with that? What makes that "foolish"?