Total loss insurance claims can be stressful. Depending on your type of insurance policy, your insurer will cover your claim in different ways.
With some insurance policies, insurers are downright generous, covering virtually all your property damage and possessions.
With other insurance policies, insurers can seem unnecessarily restrictive, denying your claim or sharply reducing your payout.
How Insurance Policy Type Can Affect A Total Loss Insurance Claim
We’re explaining the different types of insurance types and how they affect your total loss insurance claim.
Replacement Cost Policies: With a replacement cost policy, your insurer gives you the exact dollar amount required to replace your possessions and property. Instead of considering depreciation, your insurer takes a fairer approach, allowing you to replace your property with items of a similar kind and quality.
Actual Cash Value Policies: An actual cash value policy pays you the amount you need to replace the item – minus depreciation. You might think your home and its possessions are worth over $400,000. After all, that’s what you paid for it. However, when you subtract depreciation, you may find your property is only worth $250,000. That’s how an actual cash value policy might work.
Extended Replacement Cost Policy: Under an extended replacement cost policy, the insurer agrees to pay a certain percentage over the limit to rebuild your home. An actual cash value policy might pay you 30% less than what you paid for your home, for example. With an extended replacement cost policy, your insurer might agree to pay 30% over the actual cash value to repair your home.
Guaranteed Replacement Cost Policy: Under a guaranteed replacement cost policy, the insurer guarantees that it will pay whatever it costs to rebuild your home the way it was before the disaster.
Stated Amount Policies: A stated amount insurance policy is common for mobile homes. Under a stated amount policy, your insurer agrees to cover an agreed upon amount at the time your policy is issued – a stated amount. You might buy a home insurance policy with a stated amount of $20,000, for example. If your mobile home is destroyed, then you receive $20,000 – regardless of the value of your home or possessions.
Depending on the type of insurance policy, your insurer will cover a total loss claim in vastly different ways. Consider these types of insurance when determining the right home insurance policy for you.
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