insurance reimbursement split into depreciated value and full replacement cost

[ncguy2000]

What is the name of your state (only U.S. law)? North Carolina.

We had some fairly substantial wind/tree damage to our house, and our insurance company sent a settlement showing the depreciated value of the damaged items, as well as the higher estimated replacement costs (I believe this is the "actual cash value" that people speak of). The wrote us a check for the depreciated value of the repairs, with paperwork stating that we needed to submit additional paperwork (statement that the work had been completed, etc) to receive any additional funds.

My question is this... If I am able to have all of the repairs completed for less than the full estimated replacement cost, will I be allowed to pocket the difference? Or... Will my insurance company only reimburse for the amount I am billed by the contractor? This distinction impacts whether I want to choose the perceived highest quality contractor or to lean more heavily towards a contractor with a lower estimate.

Any thoughts?What is the name of your state (only U.S. law)?

 

[FlyingRon]

The structure itself you're obliged to fix.
You in fact don't need to repair or replace the contents. If the tree smashed my TV, I can pocket all the money and go without if I choose.

 

[ncguy2000]

Thanks, Ron. Just to clarify, I'm not asking whether I need to fix the structure, and my loss didn't include any personal items. I'm asking whether I will still receive a 2nd check to bring the total settlement up to the full replacement value, even if I contract to have the repairs to the structure done for less: only the depreciated amount (the amount of the first check).

 

[FlyingRon]

Most likely you'll need to get a quote as to what the real replacement cost is. In the case that my lawn mower was destroyed, I headed down to the local Snapper dealer to get a quote on the same model new. I sent that into the company and I got a check for that (less my deductible). I then took the check and bought a John Deere (which cost about what the check was for).

 

[ecmst12]

If you can get the repairs done for less then the amount you already received, you can keep the difference. But they're not going to send you any more money unless you can prove it's needed - and then you will get what you need and no more.

 

[ncguy2000]

Thank you. That was the answer I was looking for. Kind of a funny game they have set up, though, in that I might as well contract to spend the full amount of the replacement value (I gain nothing by saving them money). I bet the insurance companies would save settlement money if, e.g., they offered to split the difference with the homeowner, or provided some other incentive to limiting the cost of repair to less than full replacement value.

Cheers.

 

[ecmst12]

Well, if the estimate seems inflated, they will complain, don't you worry. But feel free to choose the better quality but slightly more expensive contractor. After all, this is your home, shouldn't you take care of it?

 

[JustAPal00]

Thank you. That was the answer I was looking for. Kind of a funny game they have set up, though, in that I might as well contract to spend the full amount of the replacement value (I gain nothing by saving them money). I bet the insurance companies would save settlement money if, e.g., they offered to split the difference with the homeowner, or provided some other incentive to limiting the cost of repair to less than full replacement value.

Cheers.

Kind of funny the way you're looking at it. I would worry about getting my house fixed the best that I could, not forcing my insurance company to spend as much as possible. Who cares how much it costs them. If you can fix it for less than you already have, then you can keep the money. If not, then get the best job done that you can, and dont worry about how much more you can charge your insurance company. It's no game!

 

[moburkes]

Just an FYI from your original post.
Depreciated value = ACV
Full value "new" = replacement cost

Generally if the insurance company writes 2 checks, you will show the receipt for what you purchased, and they will reimburse the difference.

They don't give you the replacement cost up front in case you don't replace your items. You only get the full value if you actually replace your items.

There is nothing stopping you from buying new, showing them the receipt, then exchanging your item for something less expensive. However, if they ask, in a future claim, to show previous receipts, you're screwed.