DEAR BOB: For more than 35 years, we paid fire insurance premiums on our home to the same insurance company. Last year, due to no fault of ours, our home was virtually destroyed by a fire that started at a neighbor’s home and quickly spread to our nearby house due to very high winds. Thankfully, we were not at home. Our house was a total loss. But when we tried to settle with our insurance company, they wanted to pay us only for the depreciated value of our home, not what it would cost to rebuild. We have a so-called “replacement cost” homeowner’s insurance policy. Finally, we hired a public adjuster and an attorney who, just last month, reached a settlement for about $65,000 higher than the insurance company originally offered. It won’t be enough to rebuild our home the way it was before the fire. But your readers should know what a rip-off homeowner’s insurance can be – Hugo R.
DEAR HUGO: Thank you for sharing your experience from which we can all learn. In the last few years, most insurance companies have radically changed the coverage of their homeowner’s insurance policies.
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Most insurers used to issue “guaranteed replacement cost” policies even if the rebuilding cost more than the policy limit. However, in the 1991 Oakland, Calif., firestorm, so many insurers had to pay much more than their policy limits and they learned not to issue those policies any more.
Today, the best you can get from most homeowner insurers are replacement cost policies for not more than 10 percent or 20 percent over the policy limit.
HOW TO HANDLE A MORTGAGE SERVICING DISPUTE
DEAR BOB: My mortgage company is not correctly applying my monthly payments. I have found a difference of about $900, which they refuse to acknowledge. I have gone to the Better Business Bureau but nothing has been resolved. I always add an extra $100 each month to my regular monthly payment, to be applied to reduce the principal balance. But it is not being applied correctly. What can I do? – Muhammah B.
DEAR MUHAMMAH: Write a very polite letter to your mortgage servicer providing exact details why you think your payment was incorrectly applied. Give the loan servicer 10 business days to respond.
You probably won’t get any response. That’s when you should sue the loan servicer in the local Small Claims Court for breach of contract damages of the amount you think was misapplied. If the loan servicer doesn’t respond (highly unlikely), you automatically win a default judgment.
WHAT IS DIFFERENCE BETWEEN LAND TRUST AND LIVING TRUST?
DEAR BOB: What is the difference between a land trust and a living trust? – Jideofor D.
DEAR JIDEOFOR: A land trust is a method of holding title to real estate. The primary benefit is privacy to keep the owner’s name off the public records.
But a revocable living trust is a probate avoidance method. Living trusts have a secondary benefit if the property owner becomes incapacitated, perhaps with a serious stroke or Alzheimer’s disease. Then the successor trustee can take over property management. For more details, please consult a local real estate or trust attorney.
The new Robert Bruss special report, “Robert’s Realty Rules: How to Avoid the 10 Worst Home Buyer Mistakes,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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