4 Things You Should Never Allow to be in Your Homeowner's Policy

1.  Actual Cash Value provisions (often referred to as “ACV-Only”) are the most diabolical. (This is equivalent to having liability vs comprehensive coverage on your cars.) ACV-Only means that your Insurance Company can depreciate without recoverability (i.e. discount) claim payments based on the age and condition of the items which suffered the loss. Worse yet is that Ohio is one of only 4 states that allows put-back labor to be depreciated/discounted.

Example: A 15 year old roof suffers damage and is insured under an ACV-Only policy. The lifetime of the installed shingles is 20 years according to the Manufacturer make and model. So, the claim is discounted by 75%. (5 years left on a 20 year shingle equals 25% remaining value/75% discount off replacement cost value.)

The average 2,000 square foot roof is estimated to cost $7,500 to replace. The insurance company agrees to the replacement cost of $7,500 and cuts a check for $1,875 less your $1,000 deductible. So, you receive $875 total for a full roof replacement.

Here is the ultimate insult to injury: Your roof is currently “uninsured" until it is replaced. Your roof has been “totaled” and settled for its actual cash value.  Your Insurance Company has reported this to the national CLUE (Comprehensive Loss Underwriting Exchange) report, so switching insurance companies won’t help. You must replace your roof.

All is not lost, however. We are experts at negotiating ACV-Only losses, though truth be told, this is a completely uphill battle which on average takes 1 to 2 months to win.

2.  Percentage of Insured Amount Deductible provisions are a close second to ACV-Only provisions on the unfairness scale. Over the past 7 years, the largest Insurance Companies have been announcing lower premiums to their policyholders in exchange for 1 to 3% of insurance limit deductibles. These changes do not require the consent of the policyholder, and often the only notice given is through confusing letters which few policyholders read and even fewer understand.

Example: A home worth $150,000 carries an insurance policy which stipulates a total insured amount of $350,000. (Homeowner Policies, also known as “Property and Casualty policies,” cover all potential losses-- like a worker injury when performing home improvements, liability for dog bites, medical bills for injuries occurring on the property, dead trees falling on adjacent homes, etc.)

The policyholder’s $500 deductible is changed without consent to 1% of the total insured amount which is $3,500 (1% of 350,000.) A small premium reduction is granted for this, and most policyholders are not only none-the-wiser but also marginally thankful for the savings… until a loss occurs.

3.  Lack of Law & Ordinance/Building Code Upgrades is simply ridiculous. This is one of the few exemptions to the principle of indemnification which works in your favor, allowing you to gain from a loss. (See our page here, ABC's of Insurance, “Be Indemnified”)

Examples:

1. A home has 100 year-old “knob-and-tube” electrical wiring and suffers a loss. Outlets need to be replaced but can’t because doing so violates local codes. The Insurance Company would be required to pay to have the home completely rewired to meet existing standards.

2. A roof suffers damage and is approved for full replacement. Current building code requires Ice and Water shield, Valley Flashing, Counter Flashing, Drip Edge, additional Ventilation, and Chimney Saddles etc. which are not currently installed. The Insurance Company only owes to replace what existed prior to the loss unless Law & Ordinance/Building Code Upgrades coverage is included. If you have this coverage, which only costs a couple dollars more per month, that same roof gets all of the needed upgrades done without additional out-of-pocket expense.

4. Managed Repair Program Provisions: Many insurance providers now offer slightly discounted premiums in exchange for your agreement to hire Insurance-Carrier-Chosen-Contracting companies. Most never find this out until a loss occurs. This means that you have no choice but to hire what your Insurance Company recommends, good, bad, or indifferent. If you try to go outside of this arrangement, you will be denied coverage.  That said, if this happens to you, there is still recourse. But, you will need expert guidance from someone like us or from an attorney.