What Determines My Insurance Claim Payout Amount?

Often, Expert Restoration of Utah is asked, what determines how much I will get paid out on my homeowner’s insurance claim.  All of this information is laid out in your policy, but in many cases, the average person doesn’t know where their actual policy is or they struggle to understand the verbiage in their policy.  To summarize the answer, your basis of claims settlement will describe how much money you should get in a claim based on the policy you chose with your insurance company. Claims payouts are usually based on one of 3 possible options.  The claims payment settlement options typically are:

  • Actual Cash Value (ACV)
    • This gives you a depreciated value in the event of lost items or materials in construction. This is a very dangerous option to select when purchasing your insurance because it will never allow you to replace what you have lost. A disaster claim is the worst time to have a policy with this kind of coverage.
  • Replacement Cost With a Cash-Out Option
    • This is a higher-end insurance option and usually is only available for high valued homes or specialized policies. The cash-out option provides a lot of flexibility because it is one of the only types of payout that will allow full replacement cash value, with no obligation to replace and a check in hand.
  • Replacement Cost 
    • It allows for the replacement of items that are not obsolete, or impossible to replace. The terms and conditions of this kind of coverage require you to replace the item before getting the full settlement. This means you may receive half of the amount you need to replace the item, and only get the remainder once you provide the proof it has been replaced. If you choose not to replace, then you get Actual Cash Value.
    • The rebuilding of your home is based on the insured value of the home. In the case of the building insurance, if you have insured your home to value, some insurance companies also offer extended replacement cost coverage if the actual cost of reconstruction exceeds the insured building value amount.

So, you will want to take a good look at your policy and identify which type of payout option is included in your current policy and make sure you have ample coverage for a potential loss.  Essentially, the best way to get your money’s worth in an insurance claim and get the maximum amount payable is having a strong understanding of the claims process and what you are rightfully entitled to based on your insurance contract. Keep in mind, it is NOT in the insurance company’s best interest to pay you top dollar for your insurance claim.  You might need to fight for the amount you rightfully deserve to be paid for filing your claim.

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