The best home insurance that we sell at Insurance For Texans is the kind you never make a claim with. That's because it means that you have not had anything bad happen to you, your home, or your family. That's the ultimate outcome for us. However, we recognize that the no claim outcome is just not realistic. If it was, we would never be able to sell insurance because you wouldn't need it. So let's talk about what happens in the event of a claim and how it is settled. Or paid if you will.
We will look at the two types of settlement for claims on a Burleson Home Insurance policy below.
1. Actual Cash Value
Actual Cash Value means that you will be given the value in today's dollars for your claimed item. That can play out in various ways. Some of them are good and some of them are not so good. In general terms, actual cash value settlement is less expensive than replacement cost. So you may be able to use it to save money.
The Good: The claims process is pretty straight forward. You will have the original value of the item. They will then apply a depreciation factor. You will then get a check. Done!
The Bad: If an item is old, depreciation means that you will not receive much money in return. As a result, replacing that item may not be possible without a serious investment on your part.
The Ugly: If you have a roof that is more than 15 to 20 years old and attempt to make a claim from a hail storm, you will be left with empty pockets. If a roof has a brand new value of $15,000 and a deductible of $2,000, there is a potential of $13,000 that can be paid in a claim. However, that's not going to happen. To settle this claim, start with the $15,000 and then apply a depreciation factor of 67% due to the age being 20 years old. That means we now have a potential claim amount of $4,950. Let's go ahead and apply that deductible of $2,000. Your total payout on the claim just became $2,950 on your $15,000 roof that has to be replaced.
2. Replacement Cost Value
Replacement Cost Value means that you will be given the ability to replace your items involved in the claim with like kind at the full cost of replacement. You won't be given a blank check. However, you will be able to replace the items subject to the limits or sub-limits of coverage. This kind of settlement is generally more expensive than actual cash value.
The Good: You will be able to actually replace the items involved in your claim. If you have water all over your home and our hand-scraped hardwood flooring is destroyed, you will be able to re-floor your home with hand-scraped hardwoods. For most folks, this is the most desirable outcome.
The Bad: The process of getting to the finish line of a claim is usually longer on this route. The insurance companies will take your inventory of items and issue an initial check for depreciated value to you. This can be used to begin replacing/purchasing items. Once you have a receipt of purchase that you present to the claim adjuster, the company will then be reimbursed for the difference between the initial check and the final cost of replacement. That takes time and effort.
The Ugly: The ugly here will fall on your level of responsibility. If you do not actually replace the item and present a receipt for purchase, you will not receive the rest of the money due. That means that you have settled for actual cash value while paying for replacement cost. You've wasted money!
So what else do you need to know about this process? Claims adjusters always take grief if things don't go exactly as expected. Be kind to them. They are people just like you and I. They work many of these situations and sometimes there are hiccups. Their job is not to deny you money. Their job is to make sure the claim is legitimate and the repair/replacement is reasonable in cost. Questions are generally asked because people before you have committed or tried to commit fraud.
If you aren't sure whether or not your policy is replacement cost or actual cash value, we recommend that you speak with an independent insurance agent. They will be able to help you determine which method you need and how to get it the most efficiently.
