So many insurance claims centre around this one word when it comes to figuring out what a settlement will be on your lost or damaged goods- will depreciation be used in making this determination?
There are two factors that determine this and those two factors are:
a) What coverage was available
b) What coverage did you buy
Availability
There are two main types of settlements that can be applied to a claim situation. The two main settlements are called Actual Cash Value, and Replacement Cost. What type of coverage is available typically depends on the items themselves. Things like personal belongings in a house hold, your home itself, a new vehicle or commercial property can qualify for replacement cost coverage. This settlement does not take depreciation into account and it typically makes a settlement based on the cost to replace an item with a new one. Things like recreation vehicles, used cars, old buildings, and automotive parts can have an actual cash value settlement attached where depreciation will be used to determine the cash value of the item directly prior to the loss.
What did you buy
This can be hard to determine at times as the wording on the policy pages can be a little tricky to figure out and often when it comes to specific items, you may need to refer to the contract wordings to find out what settlement you are going to get. If you are having a hard time finding these answers, give your broker a call. They will be able to find the answer for you so you can know if depreciation is going to be a factor in determining your claim settlement. Of course, these answers are always better to have before a claim happens than after, so don’t put off asking if there are areas of concern.
Understanding your insurance product is crucial to knowing how it will respond in the event of a property disaster. If you need more clarity, seek out answers- you will be glad that you did!