RC Broken Down

[iiinycboi]

So i want to talk about Replacement cost today, please provide your input.

If a house is RC valued at 200k and 80% co insurance and you insure 160k. you clearly meet the 80% co insurance, but now say you suffer a totally lost, do you get back your house to like condition or do you get 160k?

For a full replacement do you need those RC w/ inflation guard or Guaranteed RC, or modified RC. So many RC terms.

I have so many carriers with so many different forms of RC.

Also for co insurance penalties, i did a quick google search to confirm my understanding. The internet is filled with WRONG co insurance facts.

 

[djs]

Yes, but....

Excluding extended replacement cost coverage for a moment and assuming you hit exactly 80% of the total loss (160 of 200), then the policy stops at the policy limits, or $160K. That's what you paid for.

Does the $200K include debris removal? That's probably 5% - 10%, or up to another $20K, which suddenly won't be covered either.

What happens if its a catastrophic loss in the area and the price of supplies and labor goes up? Now, you are under 80% and facing co-insurance issues.

Go for 100% of reconstruction cost, don't even discuss 80%. Most carriers require writing at 100% anyway, so just do it.

By the way, like condition is a different question. Is it an ACV policy or replacement cost policy?

Dan

 

[iiinycboi]

no acv policy, talking about a rc policy.

Dan, i like you explanation! nice and simple, i'm just trying to see how other people are explaining RC. forget the 'like condition' used the wrong wording.

Now if you had 6 houses on a block would you do 80% instead of 100% the risk of them all suffering a total loss is very low? (if carrier allows you to insure all under one policy)

and i thought debris removal was part of the additional expense coverage part d?
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oh btw, RC do you just send you a check and up to you to replace the house or, you MUST replace the house.

 

[djs]

Always do 100%. Always.

Initial checks are usually ACV, once work is completed, then a supplement is issued for the replacement cost coverage. Most policies require replacement for the additional coverage.

Dan

 

[iiinycboi]

ok got it! good advice, i havent been in business long enough for a total loss claim.


btw, my teacher for the pre licensing, tells met o do 80% if its the 6 house situation. he states that total loss of 6 house is rare and you can save the insured money.

6 house space out on a lot, 200k each so 1.2MM and insure it for 960k

 

[VolAgent]

ok got it! good advice, i havent been in business long enough for a total loss claim.


btw, my teacher for the pre licensing, tells met o do 80% if its the 6 house situation. he states that total loss of 6 house is rare and you can save the insured money.

6 house space out on a lot, 200k each so 1.2MM and insure it for 960k

And if something were to happen to all six houses that exceeds 80%, what is your liability?

 

[djs]

Is each house insured separately? Or are they all listed on the same policy? If its the same policy, I understand what he is after, but I would be nervous about this if they are on the same lot.

I would still go for 100%. This is a problem waiting to happen. I can hear the claim now....

Adjuster: Wow, a total loss, don't see many of these. Here is the check to get you started rebuilding.

Client: Hey, this seems low. You didn't account for the renovations I just did. I added gold inlaid crown molding for the outside eaves.

Adjuster: Really? You are right, I didn't account for those upgrades. Let me fix this. Now, you have a coinsurance amount due and the dwelling value didn't go up, so here is the lower amount check. Thanks for being honest about the upgrades you did.

Client: Hey agent???? What is this?? What policy did you sell me? You promised I would be covered!!!! I'll see you in court.

Ahh, yes, seen it to often.

Dan

 

[iiinycboi]

good point! 100% it is.

you guys are molding my image and company model btw.

oh and the guy who taught the class is an underwriter for some big boutique commercial insurance agency. (not that it matters) maybe he was strictly speaking about adding value to your client by saving them money but also explain thoroughly about the risk with 80%

 

[VolAgent]

Seems like a poor business move by using your E&O coverage to supplement a client's coverage and let them save on premium.

How did he cover himself and his agency if there was latter a dispute about the 80% coverage?