Helpful Info from the Office of Insurance and Safety Fire

Homeowners insurance, also called property insurance, protects the homeowner from weather-related damage, as well as potential liability from events that occur on the property. Lenders require homeowners insurance coverage to protect the collateral that secures their loan. Some homeowners insurance policies do not cover catastrophic events such as tornadoes, hurricanes or floods. These kinds of events generally require a separate insurance policy.

Replacement Cost coverage is becoming more prevalent in insurance policies. It means that insurer will pay the full cost to repair or replace your damaged house or personal property with new materials of the like, kind and quality that was damaged or lost. To receive the full replacement cost, however, most insurance policies require that the damaged property be repaired or replaced within a reasonable period, generally, 180 days from the date of the loss.
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QUESTION: The insurance company estimated that the replacement cost to repair my roof is $5,500.00 but only paid $3,900.00. I only have a $500.00 deductible. Why are they paying less than the replacement cost minus the deductible?

ANSWER: The insurance policy agrees to pay the replacement cost minus the deductible provided the damaged property is, in fact, replaced. Thus, the insurance company generally advances the actual cash value or depreciated value of the damaged property pending commencement of repairs or full replacement of lost property. Once repairs begin or property replaced, the insurance company will pay the full replacement amount.


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