Actual Cash Value vs Replacement Cost To Rebuild Question

[kyleman1]

What is the name of your state - Florida


I recently sustained a fire to my house and indications are the insurance company will deem it a total loss. It's my understanding we'll likely have the option to receive a lump sum check (actual cash value) vs rebuild the house.

It's a bit complicated but our policy provides for additional coverage over and above the dwelling policy limits and so the difference between the policy limit (actual cash value) and the projected replacement cost is substantial. That is to say ---- it would be significantly more money for the insurance company to rebuild the house for us than to pay us out on the policy limit.

Is there negotiating room with the insurance company in regards to paying above actual cash value in this type of situation? If I'm thinking about this correctly they could entice us to take an increased lump sum payout and still minimize their overall exposure vs rebuilding the entire house for us at replacement cost.

 

[FlyingRon]

Anything can be negotiated. If you have something to counter their ACV determination (I once got a few hundred out of an auto claim as I'd just put new tires on the truck), you can certainly bring that up. Whether they'll be willing to deal with a lump sum rather than quibble with you on each item is purely at their discretion. Hurts nothing to try, I guess.

 

[adjusterjack]

I spent 35 years in the insurance industry, the last 9 of which was as a property claims adjuster and Florida was in my claims territory. Here's what you need to know.

I recently sustained a fire to my house and indications are the insurance company will deem it a total loss. It's my understanding we'll likely have the option to receive a lump sum check (actual cash value) vs rebuild the house.

Not quite.

You can accept the ACV and still elect to rebuild your house. You notify your insurance company of your intent to rebuild within 180 days from the date of the loss and, upon completion of the rebuild and submission of paid invoices, the company will pay you the additional amount up to the policy limit.

You will find those provisions in the Loss Settlement pages of your policy at the end of the Section I Property coverages.

It's a bit complicated but our policy provides for additional coverage over and above the dwelling policy limits and so the difference between the policy limit (actual cash value) and the projected replacement cost is substantial. That is to say ---- it would be significantly more money for the insurance company to rebuild the house for us than to pay us out on the policy limit.

Is there negotiating room with the insurance company in regards to paying above actual cash value in this type of situation?

No.

The ACV is determined by formula.

To get more money, you must rebuild.

If I'm thinking about this correctly they could entice us to take an increased lump sum payout and still minimize their overall exposure vs rebuilding the entire house for us at replacement cost.

Your insurance company isn't interested in "minimizing" anything. It will cheerfully pay you the policy limit on your dwelling if you spend the policy limit (or more) on rebuilding.

There's no negotiating on the ACV because you can potentially get the whole amount on the rebuild.

Which is exactly what I told my policyholders when they wanted the ACV money and didn't want to rebuild or repair.