Here at Altra Dry, we’re not experts on writing insurance. But we are experts at dealing with insurance companies. Unfortunately, that expertise is sometimes hard-earned. And we’ve seen a lot of customers with denied claims that could have had their claim covered with just a few tweaks. Conversely, we’ve had some claims get covered, but there just wasn’t enough money to get the claim handled without additional out-of-pocket expenses. So we’ve put together a short list of questions you should ask your insurance agent about your homeowner’s policy.
Is my policy an ACV or an RCV policy?
This can be one of the most important questions you can ask your agent. There are, broadly speaking, two types of homeowner’s insurance policies. These are ACV (Actual Cash Value) policies and RCV (Replacement Cost Value) policies. They will sometimes go by different names in different markets, but your agent will know what you’re talking about.
The quick version is that ACV policies are generally cheaper, and will cover the market value of replacement. For instance, if your TV gets damaged in a fire and has to be replaced, and you paid $1,000 for it 4 years ago, your ACV policy may only pay you $700 to replace it.
RCV policies typically will cost more, but have the benefit of usually paying in full for lost items or structures. So, for the same TV in the above example, you would be much more likely to get the full $1,000 to replace it.
Altra Dry always recommends requesting an RCV policy for your home. Yes, you will pay more for it, but you are much less likely to have to pay additional out-of-pocket expenses.
Do I have a “Named Peril Policy”?
Another policy that is popular due to its cost is the “named peril policy”. These are also prevalent in insuring older homes as well. What these policies do is give you a list of “named perils” that they will cover. Examples include water damage, fire damage, roof damage, etc. Anything outside of the scope of those name perils is considered an exclusion. They also have more restrictions on what is covered, even if a named peril is covered in the claim. For example, we recently did a job where a ceiling collapsed in a home. Ceiling collapse was one of the named perils, so the claim was covered. However, the policy had an exclusion on contents specifically in the case of ceiling collapse. Which meant that while they got their ceiling repaired, they paid out-of-pocket for their furniture, artwork, and area rugs. We never recommend these policies, but sometimes it is all the insurance company will offer.
Does my policy include a matching endorsement?
“Matching” means that the insurance company is required to replace all damaged materials if a match cannot be found. An example of this would be a flood in a kitchen. A water leak in the kitchen causes damage to half of the kitchen cabinets. Without a matching endorsement, the insurance company can replace just the damaged cabinets. Which could leave you with mismatched cabinets if they don’t still make the ones you have.
Is sump pump failure covered?
In a standard homeowner’s insurance policy, sump pump failures, and the damages that result from them, are not typically covered. So if your basement floods due to a non-functioning sump pump, you’re typically on your own. Additional coverage can typically be purchased separately for this peril.
These are just a few questions you should ask your insurance agent about your homeowner’s policy. We will continue this series with more posts in the future, as this is a big, complex topic, and it’s our goal to make it as simple and understandable as possible. Getting your policy right can be the difference between getting your claim covered and paid for, and paying for the whole thing out of your own pocket.
A Final Note
We, as consumers, have conditioned insurance agents to respond with the lowest price possible to requests for quotes. Do yourself a favor, and actually sit down with an agent to talk about your options instead of just calling around asking for rates. And PLEASE don’t request them online! You will wind up with a much better product in the long run, and a lot less headaches. Sometimes, the old-fashioned way of doing things really is better.