Commercial Property Insurance Policies
Functional Replacement Cost History and Application of Available Coverages
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30% of the loss, to complete the full cost to repair the damage.
But depreciation is a rather arbitrary concept and can even vary among different parts of the same structure. So when two different insurers were used on each of the two coverages, disputes could arise as to the extent of depreciation and the amount of the loss each insurer should pay.
As insurance buyers began to see
But depreciation is a rather arbitrary concept and can even vary among different parts of the same structure. So when two different insurers were used on each of the two coverages, disputes could arise as to the extent of depreciation and the amount of the loss each insurer should pay.
As insurance buyers began to see
the value of replacement cost coverage, the market expanded and insurers started to combine the ACV and depreciation coverages into a single item known as replacement cost insurance. Besides simplifying the coverage, this also eliminated the aforementioned disputes.
As the market expanded, insurers also found that they could safely underwrite replacement cost insurance on a wide basis and could even add it as a basic part of
As the market expanded, insurers also found that they could safely underwrite replacement cost insurance on a wide basis and could even add it as a basic part of
homeowners and commercial property policies, with an 80% or higher insurance to replacement value requirement.
But two problems soon emerged with this coverage:
1) The coverage became the equivalent of a guaranteed roof replacement contract—as soon as a roof with a 20-year life span began to age slightly, it would take only a slight wind or hail storm to inflict
But two problems soon emerged with this coverage:
1) The coverage became the equivalent of a guaranteed roof replacement contract—as soon as a roof with a 20-year life span began to age slightly, it would take only a slight wind or hail storm to inflict
