Did you recently suffer property damage from a natural disaster, such as a fire or hurricane? After such catastrophies, residents and business owners absolutely must become deeply involved in understanding their insurance policies. Some policyholders have Replacement Cost Value ("RCV") coverage, which is usually more expensive, while others only were insured with Actual Cash Value ("ACV") coverage. "RCV" pays money for the full and current replacement value of the damaged or destroyed item, up to the limit of coverage, if it is either repaired or replaced. However, usually if the "RCV" totals more than about $5,000.00; then only the "ACV" (depreciated repair or replacement cost) will be paid until such time as it has either been repaired or replaced, receipts submitted, and "like kind and quality" used in the replacement of such an item (not an improvement in quality, etc.).
Many others will have Actual Cash Value ("ACV") coverage. This coverage is based on paying money for a claim under a depreciated property valuation. Depreciation has a major effect to their claims and the amount of money that will be recovered.
Before making a property insurance claim, you should understand what type of coverage you have. For instance, a typical home insurance plan will cover dwelling loss as well as contents (personal property) loss. Be sure your coverage is for the full "RCV" of all of the contents of your home. If you do not have this coverage and experience a property loss, the insurance adjuster will depreciate every item in your home or business, which will then be unrecoverable under all circumstances.
As we've said, depreciation plays a huge role in the calculation of what money you can recover in a home or business property insurance claim. It is important to understand these 2 points:
1. Who determines depreciation
2. What are the ways depreciation is calculated
The Insurance Company and their Representative will always strongly attempt to take control from you, for the determination of the depreciation of all claimed items, including the Structure, Contents, Other Structures, Trees/Shrubs/Landscaping, etc. Your insurance company will then decide the amount of depreciation; and will subtract that amount from the "RCV" of your property. The amount they calculated as the depreciation determined on your property, will be final. unless you knowledgeably challenge their calculations.
The way in which depreciation is calculated is through the use of rates which come from published depreciation tables. These tables take into account the useful life and depreciation of a wide range of properties. Sometimes these property types and depreciation amounts are found online, but more often they are software programs used by the insurance adjusters. which may have been manipulated by those same Insurance Companies and/or their insurance adjusters. These software programs take into account the property condition, actual age, amount of use, and other factors.
In order to successfully recover for your property loss, you must understand how your depreciation was calculated because if the depreciation is not calculated properly, you could stand to lose thousands and thousands of dollars, which you are rightfully owed. You can request that your insurance company provide copies of the exact depreciation tables that they use. Be sure to consider whether or not the actual age is the same as the "effective age" of your property (be it Structure or Contents). Be absolutely sure that the insurance adjuster did not just make a guess. which is usually what has happened.
The difference between "Actual Age" and "Effective Age" can be immense, an impact your initial recovery (what you are first paid. and if you do not repair or replace. ALL THAT YOU WILL BE PAID EVER FOR THAT ITEM). It is critical for your side to control legitimately, these calculations and determinations. This is one of our specialties.
So, it is VITALLY important that you choose an experienced, professional, licensed Public Insurance Adjuster who will truly represent YOUR interest, FULLY.
REMEMBER... If you are dissatisfied with your insurance settlement, unsure if it was properly paid or not, and even if you feel that it was paid fully and completely, DO NOT STOP HERE.