re: I have a question on Fire Insurance Coverage and being dropped

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The issue with the companies leaving Florida was due to insolvency, they weren’t charging the correct premium and when big storms came they didn’t have reserves to cover.

You’re saying it’s a big problem in Florida but you had 3 options

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The higher priced options are closer to fair market value for the coverage. Newsflash: you shouldn't build a house by the water and probably shouldn't build one on a hillside in California where fires driven by an arid climate and high winds are an annual occurrence.

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Does replacement cost include the profit for the builder?

A builder is not going to charge below market value to build a house. Or repair a house.

They will scale up the profit to meet FMV

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Hypothetical: Two land owners have identical houses on different properties. The “nominal” replacement value of each house is $400k.

Property A is a $100k parcel of land, for a theoretical total property value of $500k.

Property B is a $1 million parcel of land, for a theoretical total property value of $1.4 million.

Are you suggesting that the builder is going to charge 2-3x more to build on Property B just because of the higher land value? If so that’s a silly assertion.

In reality, it will certainly cost more to build in a high-COL area than a low-COL area. The builder of in the area with high COL likely has to pay his guys more. The area probably has stricter permitting, inspection, etc. requirements. These things add up, so maybe the replacement cost for Property B is $500k instead of $400k. Just using round numbers for sake of argument.

In that case, Property A is a $500k home with $400k replacement cost while Property B is a $1.5 million home with $500k replacement cost. The replacement cost might be 20% higher, but the property value is 200% higher. Replacement cost is scaling to some extent with FMV but it’s nowhere near 1:1.