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Why might the listed replacement value on a policy not accurately reflect the cost of replacing a home?
Your insurance company only does an estimate of rebuild cost based on current market prices by square footage. The insurance replacement estimate may or may not be entirely accurate depending on factors such as Build grade and finishing option's.
Is replacement cost value or actual cash value a better choice for homeowners insurance?
Homeowners Insurance, Replacement Value Verses Actual Cash ValueIt really depends on your situation.If you have a newer home, then ACV is probably fine for you and will save you a little money. Your recent purchase price or Market value is much higher than the cost of building your home. A builder would not typically build the house and then sell it to you for less money than it cost him to build it.If the home is an older home or has depreciated to the extent that it would cost more to build than it is currently valued. Then you should choose a homeowners policy with replacement cost.
Is replacement cost the same as insurable value?
No, insureable value or 'stated amount' is the MAXIMUM that will be paid for that item. replacement cost is the amount it will cost to actually replace the item.
If your home has increased in value due to the real estate market should you increase the coverage amount?
You should only have coverage on your homeowners insurance policy to cover the REPLACEMENT COST of the house. Market value incudes inflation as well as the land. These items are not covered in the policy.AnswerWe own two houses, one in a small town in western Kansas and the other in a small city in central Kansas. If they were both in the same location, they would probably be valued approximately equally, but in the small town that would be $45 - 50 thousand while in the city either would bring almost twice as much. However, the insurance on each is about $75 thousand, which is the insurance company's estimated cost to rebuild a similar home. Yes you should increase your your insurance coverage for replacement value at least. Some policies have platinum policies which are 110% of replacement value. The coverage is for the physical home. Most homeowners insurance policies include an escalation clause that will increase the coverage on your home periodically. This will occur due to rising supply building costs as well as labor. Both contribute to home costs that must be considered.
Explain underinsurance and the implications of underinsurance?
In a word... Co-insurance penalty. Not every property insurance policy has a co-insurance clause, but most do, and it is one of the least explained but potentially most important things policy holders should understand. The co-insurance clause is represented by a percentage - 80% or 90% are common. This percentage represents the amount of coverage you are required to carry in relation to the replacement cost of the property insured. For instance, if have a warehouse of stock worth $1,000,000 and a property insurance policy with an 80% co-insurance clause, you would need $800,000 of coverage to be compliant. The co-insurance clause only becomes relavant at the time a loss occurs. At that point the insurance adjuster must determine if you adequately insured, to the co-insurance requirement. The formula to determine co-insurance is as follows: Coverage Carried / Coverage Required x Amount of Loss For example, suppose you had an inventory worth $1M and only carried $500k of insurance, with a 90% co-insurance requirement. You have a devastating fire and suffer a loss to half your inventory. Co-insurance would work like this: 500,000 / 900,000 x 250,000 = 138,889 The $138,889 is the amount your insurance company is obligated to pay you. Does seem like craziness? You paid for $500,000 of coverage any only got $138,000? Let me further explain.... Believe it or not, the purpose of co-insurance is to keep things fair for the insurance company. Most consumers and business owners know that the odds of them ever having total loss - that is the entire sum of their property destoyed - is extremely low. Many insured only want to buy enough coverage for what they perceive is their average potential claim. The problem is, they also want the policy to provide coverage on a replacement cost basis. Insurance companies, for their part want to insure the property for its entire replacement cost - for real estate this is the cost to rebuild the structure; for stock or personal property it is the cost to replace old with new. The purpose of property insurance is to protect the policy holder from the possibility of a complete and total loss. Co-insurance is an in-elegant way of forcing policy holders to insure their stuff for its full replacement value in the event of that total loss occuring. Now, what if you don't want to insure your stuff for replacement value? No problem, just buy a policy that pays on actual cash value basis. Or, find a policy with no co-insurance clause built in (expect to pay more). Or, use something called "blanket" insurance to eliminate the possibity of a co-insurance penalty. Don't let all this scare you though. In the real world of claims adjusting, co-insurance doesn't come up all that often. Policies often have clauses built in to accomodate seasonal fluctations of inventory values. Buildings are typically inspected to determine an estimated replacement cost. However, as the policy holder it is still your responsibility to ensure the policy coverage limit is appropriate to prevent a co-insurance penalty.
Is it legal to return items for cash value after the insurance company gives you replacement value for the purchase?
Yes.
Why insurance company dislikes market value accounting?
Insurance Companies do not generally insure market value when it comes to personal property lines. Market Valuated Insurance policies are most often found in Commercial Insurance Lines, they require a more complicated rating system which may need to take into account current and or future markets conditions. These variables make Market Valuated Insurance Lines much higher risk. Insurance company personal line policies are designed to protect the insured's "Actual Value" or "Replacement Value", Not the "Market Value". Insurance contracts are designed to "Indemnify" the claimant after a covered loss, not to enrich them. an Enrichment approach to an insurance contract fosters insurance fraud. Under most current Insurance statutes in the United States any enrichment of a claimant beyond legitimate losses could be construed as fraud. Market Values are indefinite, they fluctuate with supply and demand as well as all other economic and emotonal factors, Market values can change daily or even hourly making it difficult to quantify a risk. Actual Value and Replacement Value do not suffer these problems. and actual or replacement value should be comensurate with you property investment or you may be over paying, Unless of course you are a speculator. Actual Value can be more or less than the Market Value, due to the wide swings in the market. Actual Value and Replacement Value prove to be a steady and reliable method of providing indemnification.
Does insurance companies use replacement value for the car?
The Insurance Companies use ACV or Actual Cash Market Value. The ACV for any private passenger vehicle can be found at Kelly Blue Book.
When the cash surrender value of a life insurance policy is used to purchase a policy marketed by another insurer is?
External Replacement
What is the difference between antique auto car insurance and regular car insurance?
Antique car insurance is usually based around replacement value and assumes the car will not be driven often except maybe to a car show. Regular car insurance is based around replacement value as well as potential damage and injury since it assumes the car will be driven regularly and have more potential for accidents rather then theft.
Replacement of contact lenses is it covered by insurance?
Whether or not replacement contact lenses are covered under an insurance policy is completely dependent on the individual policy. Many insurance companies will cover up to a certain dollar amount annually, and then any charges over that annual coverage amount are to be paid out of pocket by the insured.
Can you drive a car with no insurance under your insurance?
Yes, it can cover you depending on the reason you were driving another persons vehicle.Remember that auto insurance follows the legal liabilities of the named insured. If you were driving another persons vehicle under the "replacement vehicle rules" then yes your liabilities should be covered under your own auto insurance policy.A replacement vehicle is typically defined as a borrowed or rented vehicle that one is driving because their own vehicle is under repair, broken down or otherwise unavailable to you at the time.If you were just driving your friends car for the fun of it then you should contact your insurance agent for coverage advice.
Is it necessary to get engagement rings insurance?
Though purchasing engagement ring insurance by putting it under your homeowners insurance is not necessary, depending on the value of the ring it is highly suggested.
Does replacement insurance require the house to be built in the same location or can it be another location?
All of the policies I have looked at consider "replacement" as the rebuilding of the dwelling on its existing location. If you go somewhere else to build, you get the face value, not the replacement value. You also have the issue of cleaning the debris from your lot if you move on. Your insurance isn't going to cover that unless there is a rider. Then you should still own that lot and be able to sell it on your own, but don't assume anything.
Will your homeowner insurance pay for your house and build you a new one?
If your homeowners Insurance Policy has "Replacement Valuation", It will pay the cost to rebuild your home. If you bought an ACV policy, then it will only pay you the current value of your home.
Are you stuck with the replacement value set by the insurance broker - the amount seems exhorbitant and an attempt by the company to increase their rates unreasonably - do you have a recourse?
hire a licensed contractor to assess the replacement cost of your home - then discuss with broker and or company directly
Will fire insurance on my dwelling cover its contents?
This depends on what coverage level you have with your fire insurance. Fire insurance policies offer personal property coverage as an optional add-on, and even include the option to cover either the value of the items or to upgrade and cover their replacement cost.
