Do you have trouble reading the paperwork that comes with a property claim?
This post and video will help home owners with storm damaged homes that are attempting to understand the paperwork that insurance companies send.
When insurance companies approve the repair or replacement of items on a home following storm damage they send a lot of paperwork. The paperwork can be a bit over whelming at first, but we hope to help with this video. Here are a few terms that may help as well. Please keep in mind these are our lay person definitions of these terms.
- Replacement Cost Value (RCV) – The cost to replace an item following storm damage. This is often set by a industry standard that takes in consideration the date , location, and current types of materials on the property.
- Depreciation – This is the loss of value over time. For example, if a 30 year roof is 15 years old then it is depreciated by 50%, or it has lost 50% of it’s value.
- Actual Cash Value (ACV) – this is the current value of an item which is replacement value minus depreciation.
Deductible – The amount of any property claim that the property owner is responsible to pay. This amount can have a wide range and is set when the policy is purchased. Deductibles can be set amounts like $1,000, or a percentage of the total value of the property as set by the policy, typically 1% – 10%. For example, if the property is valued at $200,000 on the insurance policy, and the owner has a 1% deductible, the amount the owner is responsible for is $2,000. It is important for all property owners to know their deductible.
- Net Claim – This is amount an insurance company will send before the work is complete. This is typically RCV – Depreciation – Deductible = Net Claim. The insurance company provides this amount, and will not cover the property damaged until it is repaired or replaced. Another important factor is to know that the insurance company may include the mortgage company on the check. This will require the owner to send the check to the mortgage company for endorsement.
- Recoverable Depreciation – The amount of depreciation the insurance company will send once the work is complete. If a policy is a replacement cost value policy, the insurance company will provide the total amount needed to replace or repair the property that is damaged. However, they will not provide the total amount until the work is complete, and an invoice has been submitted. Once the work is complete and all their requirements have been met the insurance company will send the recoverable depreciation .