Depreciated Value draft

[Collins1078]

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

Hello and thanks for reading.

My house recently burned and I have replacement value insurance on the structure and contents.

My insurance company (Allstate) paid for an independant appraisal for the value of my home prior to it burning. The appraisal was 87,500.
About 8 weeks ago I had recevied a new PVA report which listed the taxable value of my home at 95,500.
I was told that the appraisal would likely be a bit higher than the PVA value, but in this case it wasn't and neither appraisal had ANY knowledge of the "Extras" e.g. Masonry Fireplace, 2x6 walls...

My adjuster said that it did not matter that the 1st draft for the depreciated value was low or that neither appraisal contained structure specifics because the 2nd draft for the replacement cost would make up for the lower appraised value.

I don't doubt what he has told me to be true; however, I would like confirmation to be on the safe side.

Thanks for your time.

 

[JustAPal00]

The tax value of your home has nothing to do with the insurance value. The tax value is a real estate value where as the insurance value is what it would cost to rebuild!

 

[Collins1078]

The tax value has everything to do with the 1st draft for the structure. The first draft is the appraised / real value of the home just prior to the loss. The 2nd check is the differance between the first check and the cost to rebuild.

My question is does it matter on which check the money falls?

e.g. If I have a claim of 180,000 and the 1st check is 80,00 and the 2nd check is 100,00 or if the 1st check is 120,000 and the 2nd check is 60,000?

It probably doesn't, but I'm trying to figure out if there are any scenerios where it would matter.
Taxes? Contents Coverage? ...

 

[JustAPal00]

I guess I don't understand what your asking. Maybe no one else does either, that's why no one else answered. If you had GRC on your home and the policy limit was enough to cover the home then even if the rebuild goes over the policy amount you should be fine. Where you wouldn't be is if you only had $50k on your home with a rebuild apraisal at $87,500. My original point was that the tax value is based on real estate values which have nothing to do with rebuild values. Just look at any row home in an old east coast city. Most have rebuilds way above their tax value.

 

[moburkes]

The tax value has everything to do with the 1st draft for the structure. The first draft is the appraised / real value of the home just prior to the loss. The 2nd check is the differance between the first check and the cost to rebuild.

My question is does it matter on which check the money falls?

e.g. If I have a claim of 180,000 and the 1st check is 80,00 and the 2nd check is 100,00 or if the 1st check is 120,000 and the 2nd check is 60,000?

It probably doesn't, but I'm trying to figure out if there are any scenerios where it would matter.
Taxes? Contents Coverage? ...

No it doesn't. The "tax value" (do you mean market value??) of your home means nothing to the insurance company - after the policy has been written. An example of when the market value matters to the insruance company is at the time of the application. If the cost to rebuild is $300,000, but the market value is $120,000, the insurance company may decline to write a replacement cost policy. However, once the insurance policy is written, let's say at the replacement cost of $300,000, the market value no longer matters - even in the event of a claim.

When an insurance adjuster, after a total loss, pays the claim in increments, they are simply ensuring that they money is being used to replace the home, and not being used for other purposes. If the homeowner decides to take the first $100,000 and clean up the debris from the property, but chooses not to rebuild, the insurance company can decide not to issue another check - since the policy was written so that the insured must rebuild. If the homeowner starts the rebuilding process and it is going along as it should, the adjuster would then issue another check (say for another $100,000). However, again, the market value of $120,000 has nothing to do with this transaction.

Is that what you're asking?

 

[Collins1078]

Thanks,
I just wanted to make sure I wasn't stepping into something.

The first check specifically states 'Depreciated Value Draft' and the check notes state that the claim is not closed.
My appraiser said they will pay me in two drafts; the first being the depreciated value and the 2nd being the difference between the depreciated value and the replacement value which will be provided by the contractor once the plans are completed.

I knew that the appraisal was lower than the taxable value which is backawards of what it should have been so I became a bit cautious.

Thanks for your advice, I'll just wait to deposit it until after I get the second check from them when the replacement cost is approved by my insurance company.

 

[JustAPal00]

Maybe you don't understand, the tax value has nothing to do with the "depreciated value" or the "replacement value"! The "depreciated value" is the estimated rebuild value minus depreciation. That is an estimate of what it would cost to built the home new! This is what they are willing to pay you now. If you didn't have GRC on your policy, it would be all you would get. The second draft will be the actual rebuild cost minus what you've already been paid. You will get that when the contractor is ready to build. Neither one has anything to do with the "tax value"!! The tax value is a real estate estimate that you pay taxes on. There is no correlation between the tax value and the rebuild value!! As I pointed out before, some older homes would cost way more to build then they are worth so they have a tax value below their rebuild value. On the other hand, homes in some areas have such high real estate values that the tax value is many times the rebuild value!

 

[moburkes]

You're right, he's not getting it. He's not listening, but thanking us anyway. Oh well.

 

[Collins1078]

Maybe I'm confused becasue the adjuster told me that the PVA value was used in the calculations to arrive at the appraisal that was done by a 3rd party appraisal firm paid for by my insurance company which was then used to create a depreciated value since there was no longer a friggin house to obtain an acurate value.

And I do thank everyone for trying to understand what I'm trying to communicate.

I can not believe how hard it is to ask if the depreciated value draft mattered that it was 15 to 20K lower than it should have been assuming the 2nd draft sufficiently covered the deficiencies of the 1st draft.

 

[JustAPal00]

The information from the PVA report was probably used to come up with an estimate of the rebuild cost. IE: square footage, construction type, amenities! By putting the above information as well as the zip code the home is in into the program used by the insurance company, an estimate can be made. Since the home friggin burned down! The tax value contained in the report had nothing to do with the estimate! I do this for a living!