After a fire damaged an insured's home, the HO adjuster offered to pay only part of the repair bill, stating that he was taking depreciation off the total. The agent was surprised since this was a current ISO HO-3 policy with replacement cost coverage on the building. Although the carrier can pay ACV until actual repair or replacement takes place, can the actual repair costs be depreciated?
Recently our 'Ask an Expert' service received two questions dealing with the 'requirement' that property be replaced within 180 days under the ISO Homeowners program. This issue comes up quite often and this provision is sometimes misinterpreted. Below is one of the questions we received and our response.
Every agency has experienced this to one degree or another: A client buys a house and the replacement cost of the dwelling is considerably less than the mortgage amount. The insurer refuses to issue a policy with a Coverage A amount greater than the replacement cost, but the lender insists on a policy limit equal to the mortgage amount.
Our 'Ask an Expert' service got a question this week from an agent who represents an insurer who has begun using a Functional Replacement Cost Loss Settlement endorsement on older homes which have construction materials that are obsolete, antique, or custom. This endorsement says that in the event of a claim, the damaged building will be repaired or replaced with less costly common construction materials and methods. The big issue is how to arrive at the Functional Replacement Cost limit.
A critical element in the principle of indemnity is that an insured can only collect for a loss in an amount equal to his or her insurable interest in the property. That gives rise to the question, 'What constitutes insurable interest?' In this article, we'll take a look at a common exposure -- an engagement ring -- and who does or does not have an insurable interest in it.
According to the experts, a majority of homes are undervalued by at least 25% on average. Magazines and newspapers are replete with articles about insureds who suffered major losses only to discover their homeowners insurance was grossly inadequate to fully compensate them. Who's to blame and what can we do about it?