In Home Insurance Claims

After a property loss, your insurance company has ways of determining how much they will pay for the repair or replacement of that damage. As a policyholder, it is important to understand how your insurer determines that cost. This will be the sum they pay to repair or replace property elements based on comparable materials and quality.

Your insured value will be different than the cost you may have paid to build or buy your home. While a contractor is able to take the time to negotiate prices during an initial build or repair, a reconstruction cost can be quite different because of the urgency of the situation. Consequently, your insured value should take this into consideration.

Returning the Property to Pre-Incident Condition

Repair costs should include all the expenses that are associated with returning the building to the pre-incident condition. This should include things such as materials and labor, as well as overhead and profit. This amount should be calculated based on the current fair market value even if the materials could be purchased at a discount or the homeowner has decided to make the repairs.

Replacement Cost Value

Settlements based on replacement cost value, or RCV, will compensate for the absolute cost of the replacement or repair in the current marketplace. If the replacement or repair will cost $10,000, that is what your claim is worth.

Actual Cash Value

Actual cash value, or ACV,  is a confusing term and has been disputed in the courts several times. The actual cash value of a claim is the replacement cost value minus any depreciation. The insurance company will calculate the depreciation based on a formula that considers the age and condition of the property.

The Difference is Critical for a Homeowner

The difference between RCV and ACV is critical. With a claim based on actual cash value, a policyholder will be hard-pressed to replace damaged property for a depreciated value. Obviously, a homeowner would prefer to be reimbursed based on the replacement cost value instead of the actual cost value, whereas the insurance company would prefer to pay a claim on the latter.

It is important to know how your insurance company will calculate your claims. If you have items that simply can’t be replaced such as art and antiques, you should discuss this with your insurance agent before any loss occurs.

What If You Are Underinsured?

Some policies will include a clause guaranteeing replacement cost even if the home was a little underinsured. This is important to understand. You will want to ensure that your coverage is adequate in times of weather disasters.


Many homeowners expect that the limits that appear in their policy indicate how much they can expect to be paid for a claim. It is important to note that these are the maximum potential payments and not necessarily the amount that will actually be paid.

There are other types of valuations that insurance companies can use. It is important that you read over your policy and understand exactly what you are covered for in case of a hurricane or other incident.

If you feel you have been treated unfairly by your insurance company, it is important to get the legal advice of an insurance professional. Call the Miami insurance lawyers at Korin Law, P.A. to get professional legal advice about your insurance claim.

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