Understanding Property Insurance Claims: Estimates and Depreciation
After sustaining business interruption loss from any disaster event such as: fires, wind, hurricanes, tornadoes, flood, water, hail, lightning, equipment breakdown, and theft and vandalism, your insurance company must provide a detailed written estimate of all damages – to the property itself and the contents. This estimate is usually calculated and written in a software program called Xactimate. Typically, the layout of the damage should be labeled by location of the repair, such as: roof, exterior, interior room by room. It should also list the square footage of such locations. Each of the labeled locations should itemize what repairs are needed by giving the square footage of repair, price per square foot, total cost per item, depreciation amount, and actual cost after depreciation. Replacement cost value (RCV) is the amount it will cost to repair the area using current prices for like kind and quality materials. This is prior to any depreciation or deductibles. Depreciation is based on age. Even if you have replacement coverage most of the time, the insurance company will depreciate the repairs and hold that money until the repairs are completed. Actual cash value (ACV) is the replacement cost value minus depreciation amount.
At this point in the post, you’re probably confused about what deprecation is and what the numbers associated with deprecated repairs mean. In order to help you become a more educated policyholder, TDA’s Texas public adjuster team has included a short, simple example for you to look over.
- Material type: 30 year shingle
- Current age: 10 years old of 30 year life span
- Replacement cost value: $10,000
- Depreciation amount: 33% = $3300
- Actual cash value: $6700
If you’re still a little (or a lot) confused about repair cost deprecation, please contact a Texas public insurance adjuster through The Disaster Advocates, Inc. to get clarification.
Property Insurance Claims: Replacement Cost Coverage
Many property owners pay extra on their premium to have replacement cost coverage. However, this does not mean you will get the replacement cost upfront. Many insurance companies hold the recoverable depreciation back until the construction project is complete and the property owner provides invoices to show that they spent the cost of replacement as estimated. This recovery of depreciation has a deadline which can range from 6 months to 2 years from date of loss. To find out the recoverable depreciation deadlines, you must read the policy. You may provide a written request for an extension of time, but there are no guaranties that the insurance company will provide more time. Make sure you get any extensions granted by the insurance company in regards to recoverable depreciation in writing.
Deprecation and replacement cost coverages can be as difficult to understand as the whole of the Constitution…written in Latin, but if you have a skilled, experienced, and knowledgeable Texas public insurance adjuster on your side, you can rest assured that even though the terms and numbers are confusing to you, your Texas public adjuster knows exactly what to do.
The Disaster Advocates are confident that their deprecation and replacement costs specialists are the best in the business, and that they can provide their clients with the best, most efficient, truly effective insurance claims services.
To learn more about how we can help, contact the Texas public adjusters at The Disaster Advocates today for your No Cost Consultation and Claims Review.