Question 1

How does replacement cost value work in insurance?

Accepted Answer

RCV insurance: the policy pays to replace damaged property with new property of like kind and quality. Process: initial payment (the insurer pays the ACV amount immediately after the loss), repair/replacement (the insured repairs or replaces the damaged property), and supplemental payment (the insurer pays the difference between ACV and the actual replacement cost after the work is completed). The insured must: actually repair or replace the property (the insurer does not pay the full replacement cost if the property is not repaired), and complete the work within a specified time (typically 180 days to 2 years, depending on the policy).

Question 2

What are the common disputes with replacement cost insurance in Florida?

Accepted Answer

Common disputes: scope of damage (disagreement about what needs to be replaced), cost of replacement (disagreement about the cost of materials and labor), matching issues (the insurer refuses to replace undamaged portions to achieve a uniform appearance; e.g., replacing only damaged roof tiles that don’t match the remaining tiles), code upgrades (the insurer refuses to pay for building code upgrades required by Florida law), and depreciation holdback (the insurer withholds the depreciation amount and the insured disputes the calculation). Florida law: Section 627.7011 requires insurers to offer replacement cost coverage for residential property.

Question 3

What is the co-insurance requirement in replacement cost policies?

Accepted Answer

Co-insurance: many commercial replacement cost policies include a co-insurance clause requiring the insured to maintain coverage equal to a specified percentage (typically 80%) of the property’s replacement cost. If the insured is underinsured: the co-insurance penalty applies (the insurer reduces the claim payment proportionally). Example: property replacement cost $1,000,000; required coverage (80%) = $800,000; actual coverage = $600,000. The insured carries only 75% of the required coverage (600K/800K), so the insurer pays only 75% of any claim (minus the deductible).

Replacement Cost Value

Replacement Cost Value (RCV) Insurance

Process

FL Disputes

Co-Insurance

Related Terms

Barnes Walker Insurance Law

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