Insurance policies have different valuation methods and insurance companies have different markets, guidelines, options, strategies and customers they want to attract. Having a proper understanding and comprehend of these valuation methods will help you decide which is the best policy to purchase.
Actual Cash Value/ACV
The basic valuation methods can be found in real estate policies. By taking the replacement cost value and subtracting depreciation. That is what insurance company adjusters determines the cost associated with rebuilding a property or returning it to is previous state.
Another valuation method that provides for the replacement of an old damaged property with a newer version taking into account present day construction or replacement cost without adjusting for depreciation. To arrive at this cost, your company’s adjuster will ask in depth questions regarding the property such as bathrooms, bedrooms, appliances etc. We then make use a software to calculate the replacement cost value of commercial and residential structures.
Functional Replacement Cost
This is a valuation method that makes provision for an insurer to replace lost or damaged property with a functional alternative. The functional replacement cost method is used primarily for older properties. What it essentially entails is the insurer determining the cost of replacement of the property with something similar. That is, the same class or quality that was in the original property should not be expected for the replacement. For example, if you had a previous bathroom with laminated cabinets and walls, instead of getting the exact same thing, you may get a cheaper alternative. You end up with a functional bathroom but not of the quality you had before.
This valuation method takes note of the forces of demand and supply and as a result, price is based on the condition of the fee market. For example, you purchase a home in a section of town where the properties are high end and all local services surround it. The purchase price was at $600,000 however, in the current market, if you were to rebuild the home after suffering a loss (replacement value), the price may have gone down or up (for a similar style) depending on the state of the market. Although this valuation method is best suited for thriving real estate market.
- Agreed Value
An agreed value is a property value that you and your insurance agree upon at the beginning of your policy period This method is used when the true value cannot accurately be determined.
Once you have provided a statement of values to your insurer, the coinsurance clause in your policy will be suspended for one year (the term of your policy). If a loss occurs, your property will be assessed based on the agreed upon value as long as you have insured your property for that amount.
How To Get Maximum Settlement with Valuation Methods
Above are the different methods used to value property claims. Some of the methods are more complex than others. If you are unfamiliar with valuation methods and looking for maximum settlement. Considerate hiring a public adjuster.
Bi-State Public Adjusters work exclusively for policyholders. We have experience with all the valuation methods. And ready to help you with your claim Call Today…. No Obilgation Claim Consultation and or Policy Review.