Most of us don’t have home claims very often—but when we do, the types of coverages we have in place are important. The majority of insurance companies pay claims on a depreciated basis until the loss is repaired or replaced. Assuming 50% depreciation, a home loss of $100,000 after deductible would be paid at $50,000 up front—with the other $50,000 paid while or after repairs or replacement are made. For a full replacement cost settlement, standard claim settlement procedure requires that replacement be done at the same location.
No Depreciation, No Rebuild/Replacement Cash Settlement
However, several Forest Insurance companies offer a rare “no depreciation, no rebuild/replacement” cash settlement feature that enables cash payout without deprecation or the requirement to replace or rebuild. So, in the example above, a check of $100,000 would be written up front for a claim. If the claim turned out to be higher, an additional check would be written. This type of settlement feature becomes even more important when the destroyed items are irreplaceable—such as antiques or fine art. It’s also quite handy if you decide to simply relocate rather than rebuild.
So, where to find this feature in your policy? In the Claim Settlement section, tucked in the verbiage addressing a “Total Loss” of the property. Remember, it’s at the insurance company’s discretion to handle partial property or contents claims on a cash settlement basis. And appraisals—for homes, fine arts, jewelry, etc.—go a long way in helping establish value and expediting a desirable claim settlement.
Reputation Matters
Beware of agents who tell you they offer “cash settlement.” It must be “cash settlement without depreciation or the requirement to replace”—from a company with a proven track record of settling claims in that manner. Forest Insurance carriers offering a “no depreciation, no rebuild/replace” cash settlement option include: AIG, Chubb, Cincinnati Capstone, Nationwide Private Client, and Hanover Prestige.
The Bottom Line
When it comes to full replacement cost cash settlements for home claims, standard policy terms can be restrictive and vary from company to company. For “Total Loss” situations, it can be vastly more desirable to have a No Depreciation, No Rebuilt/Replacement Cash Settlement option in place. For more information on cash settlements—including the No Depreciation, No Rebuild/Replacement option—contact the experienced advisors at Forest Insurance at (708) 383-9000 and www.forestinsured.com.
