That’s not a clickbait title, I’m serious. I’m too old to write clickbait.
We all put things off from time to time. Some of us are disciplined enough to jump right on a task, but even those people sometimes need to do some research.
Some of us tend to procrastinate, but don’t have time today, so they’ll procrastinate tomorrow.
Most of us just have real life stuff happening, and anything that isn’t an immediate crisis might have to wait. Work, kids, activities, etc, it all takes up our time, and it’s perfectly natural that we put some things off until we feel like we have some time for it.
However, that can cost you. Big time.
I don’t mean that you can lose money when a tree falls on your house during a hurricane and you just LET the rain pour in for the next 6 months. Or that your septic tank can back up and you just “won’t have time” to handle it. Those types of issues have what Harrison Ford and Tom Clancy call a “Clear and Present Danger” to your home. I still love that movie.
I mean that if you need to file an insurance claim for something, even a seemingly small something, you need to do it NOW, or you are risking thousands of dollars. What do I mean? Here, I’ll show you.
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This notice was sent to one of our customers by their insurance company. Now, we removed all of the personal information for obvious reasons, but here’s basically what it says. “Hey, if you file a claim for wind or hail damage to your roof, we are supposed to pay for the damages in 2 checks, but we aren’t going to send you the second one because we are greedy and don’t care about our customers.”
Some of you are thinking “yeah, big businesses are always doing that,” and some of you are thinking “what the heck does that mean?” One of you doesn’t even believe me, but that one thinks the Earth is flat. So for the sake of you who are wondering, and the one flat-Earther, let’s break this down.
Many kinds of insurance pay in different stages. Most home insurance won’t pay 100% of a claim up front anymore, since 2008. Instead, they pay parts at different times. Some up front, some after some paperwork, some at the end, etc.
The total amount required to restore your property when you file a claim is typically referred to as the Replacement Cost Value (RCV). You might see that on an insurance estimate or your policy. That’s the whole claim total for everything. You might also see the phrase Actual Cash Value (ACV), which means the value of the undamaged old thing that you are filing a claim on. For example, your old, faded patio furniture isn’t worth the price of new patio furniture. So, when you file a claim, you might get a statement for the RCV up front, along with a check for only the ACV. When you replace/fix the damage, you should then get a check for the rest of the RCV, not including your deductible. This difference between the ACV and RCV is called “Depreciation.”
Exciting stuff, right?? If you need to grab a Red Bull, I won’t be offended.
Right about now, you’re asking yourself “why is this piece of writing taking so long to make a point?” The answer is that you have to understand a couple of basic concepts about insurance before this all makes sense. Sure, I could ask you to Google each of these terms, but then you’d find a video of a dog, and this would all be over. Did you see the one where the dog was getting on the counter to eat the chicken nuggets? Hilarious!
So, you file a claim, you get a check for the ACV, you hire contractor to do the work, and then you get the check for the rest of the claim, right?
Yeah, that’s the whole point of this. Insurance companies don’t want to pay you ANY money, so they worked up this “ACV Only” bit that they add on to a policy. It’s usually part of an “endorsement” or something that sounds good.
In truth, you just never get that second check. You don’t actually get the money that they would normally pay you…or that another insurance company would pay you.
“Ok,” you’re thinking “but it isn’t that much, right?”
Want a real life example?
A house in Cobb County, Georgia, with Liberty Mutual insurance, with only ACV coverage for their roof, got an estimate from their insurance company for $13,450 for their roof replacement. They have a $1,500 deductible. Their payment from insurance?
$8,546.00
That’s a lot of “surprise” money to cough up for the average American family, especially since the deductible has *nothing* to do with how your ACV is calculated. This family expected to pay the deductible, but the rest was a surprise.
Do you think they started shopping for a new policy? Would it surprise you?
By the way, most mortgage companies require their customers to have homeowner’s insurance…RCV coverage homeowner’s insurance. That’s why the insurance companies make these “riders” or exceptions; they can’t make the whole policy like that.
The above notice came along with a “time to renew” notification that was sent to our customer, and it was triggered because the roof will soon be reaching an age that they don’t like. Insurance companies that do this typically won’t do this with a brand new roof, but starting as early as 10 years old, you could see this happen. That is why waiting until “something happens” can really put you in a bad spot.
So, take a moment sometime soon, on “bill pay day,” or “checkbook balancing day,” (if people still do that) and take a look at your insurance policy. Call your agent and ask questions.
As contractors, we cannot tell you who to buy insurance from, or endorse one particular company. However, we see things like this *every day,* where our friends, family, and customers get this kind of treatment from their insurance company. Take a few moments, familiarize yourself with your policy, and make the right decision for your home and future.
P.S. Wouldn’t it be so much worse if your insurance company not only stuck you with ACV coverage, but didn’t even pay for the items that you need for your claim? Click here for more information.