AboutJay K. Williams, AAI, AIP, CIC, CRM Expertise I can answer questions relating to the following coverages: personal auto; homeowners; commercial auto; commercial liability; commercial property; business income and all other property and casualty coverages.
Experience I have been in the insurance industry in Florida since 1979. I am currently the president of a Florida domestic insurance company subsidiary. I've taught continuing education classes in Florida and across the country. I am quite familiar with all coverages including Florida Condominium master policies and unit owner policies. I also specialize in agent professional liability. I have been a professional educator since 2001.
Organizations I am a member of the Florida Associaion of Insurance Agents, the state affiliate of the Independent Insurance Agents and Brokers of America.
Education/Credentials I currently carry the following professional designations:
Accredited Advisor in Insurance (AAI)
Associate in Insurance Production (AIP)
Certified Insurance Counselor (CIC)
Certified Risk Manager (CRM)
Question In the case of total loss of home, say by fire, what is the 'normal' method of payout with replacement coverage? Current insurance home replacement limit: $400,000 (exclusive of contents). County assessed market value is $250,000 in Northeast Oregon.
Home construction was completed in 1998 with much of the work done by owners. Due age/physical limitations, owners need advice on options: (1) Rebuild on current foundation by hiring replacement home rough-in and complete balance themselves, (2) Hire contractor to replace home, or (3) Sell property and move to new location because of age and physical limitations to rebuild themselves.
Question is how would claim and the estimated amounts be paid out in each of the 3 options, relative to 'instant' cash payout and deferred payout(s)?
Answer Hi Jerry,
The typical settlement method for the structure is replacement cost. That means the cost to rebuild with like kind and quality materials in today's market subject to the maximum of the amount insured for. The assessed value has no bearing on the settlement. The one caveat to replacement cost is if the property is NOT replaced. In that case, the policy pays actual cash value...defined as the cost to replace in today's market less depreciation.
In both scenario's 1 %26 2, the company would pay for the actual cost to rebuild the structure, including the value of the labor. In the case of scenario 1, you may have to negotiate the value of the work...that's assuming the company would allow that option.
It's likely that the company might agree to allow the proceeds to be used to purchase an existing structure that is of similar kind and quality up to the amount of the coverage in the policy.
Payouts are normally done at certain points during the rebuild phase...similar to what would be done by a mortgagee when a house is being built. In the case of option 3, the payout would probably be made at closing.
Additional living expenses can be paid via advances or reimbursements. Personal property losses will have to be substantiated by receipts or pictures. The typical loss settlement is ACV, but if replacement cost has been purchased, the company will pay ACV until the items are replaced.
I hope that helps...let me know if you have additional questions.
