Insurance claim estimates are written in an odd kind of English. Insurance companies aren’t purposely trying to confuse you, but they don’t seem to be going out of their way to help you to understand the claim estimate either. Here are explanations of five terms that will help you make sense out of your claim estimate.
A typical Colorado Springs area insurance claim scenario may look like this:
The insurance adjuster estimates that the total cost to replace your damaged roof, The Replacement Cost Value (RCV) is $9,000.
Your Deductible is $1,000.
The adjuster determines that because of age and regular wear and tear, the current roof had depreciated by 40% of its Replacement Cost Value (RCV) or $3,600. (9,000 x .40 = 3,600)
The insurance company will hold back the $3,600 of Depreciation until the work on the roof is completed and they receive an invoice for the work. This is called Recoverable Depreciation.
The amount of the Depreciation, $3,600 is subtracted from the $9,000 Replacement Cost Value (RCV) giving us a remainder of $5,400 which is referred to as the Actual Cash Value (ACV).
From the Actual Cash Value (ACV) of $5,400 the insurance company subtracts your Deductible of $1,000 leaving a remainder of $4,400 which is the called the Net Claim and is the amount of the First Check they will issue to you.
- Description: Sounds simple enough doesn’t it? Let’s see. Remove, tear off and haul away. Piece of cake. It means just that. It is what the insurance company will pay to remove the existing shingles from the roof, tear off the underlayment and haul the old material away. With some insurance companies this includes the trailer or dumpster used to haul away the material with others it does not
- Material Only: Some insurance companies will pay for the material separate from what they pay for the labor to install it, some put the material and the labor together.