Claims adjusters don't spend a lot of time going over the figures on a small loss. By and large, they tend to want to take your word for things, pay you and close the file. On a big one, things change. The valuation provisions in your policy become all-important in determining how much of your loss is paid.

Ideally, you would hope to get 100% of the cost new to replace your property, and this form of valuation, Replacement Cost, is generally available. Always ask for it. There are other valuation terms also in use which allow for deduction from your claim for depreciation, allowing for the reduction in its value. ("Actual Cash Value") While a piece of 30-year old property may have enormous value to you, an adjuster could argue that depreciation has reduced its insurance valuation to less than half the cost of replacement.

The other nasty little secret in the fine print is coinsurance. A coinsurance percentage in your policy essentially means you guarantee to the insurance company that the amount of insurance you bought represents at least that percentage of the total value of your property.  A 100% clause means you must insure 100% of property value; 90% means 90% of value, etc.  Especially on larger claims, even those well below your policy limit, adjusters look at two numbers: The limit on your policy versus the amount of insurance required. If you bought $50,000 of insurance on a property valued at $100,000, but accepted the 100% coinsurance clause, you'll get about 50% of your claim paid. This happens EVEN IF YOUR CLAIM IS BELOW THE POLICY LIMIT!  The adjuster creates a fraction by putting the insurance limit you bought on top, the amount you agreed to buy below, then multiplies that fraction times your loss.  This is a well-known computation in the insurance industry which has been known to reduce the payment of losses by 50% or more.

Policies are frequently available with replacement cost provisions & without coinsurance clauses, and represent an enormous advantage to you in a large claim where value may be an issue. Agents may not call your attention to the valuation provisions in your policy and you'll be the loser if you learn about them after it's too late.


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