Filed Under:Agent Broker, Personal Lines Business

Understanding how property is valued after a fire

State by state guide to valued policy laws

When the wildfire smoke clears along the Pacific coast, property insurance policyholders will be faced with filing claims that may be complicated by California's status as a
When the wildfire smoke clears along the Pacific coast, property insurance policyholders will be faced with filing claims that may be complicated by California's status as a "valued policy" state. This Oct. 9, 2017 satellite image from the National Oceanic and Atmospheric Administration shows smoke from several fires, noted in red, burning in California. (NOAA via AP Images)

Analysis brought to you by the experts at FC&S Online, the unquestioned authority on insurance coverage interpretation and analysis for the P&C industry. To find out more, visit the National Underwriter website, or contact the editors via Twitter: @FCSbulletins.

The wildfires that recently decimated thousands of acres, homes, businesses and vineyards in California have caused billions of dolllars in property damage.

When the smoke clears, policyholders will be faced with the challenge of filing insurance claims, which are likely to be complicated by California’s status as a "valued policy" state. For these policyholders, the difference between actual cash value or replacement cost may be enormous.

Actual cash value means replacement cost of the property at the time of loss, less depreciation. The determination of the actual cash value of any property would include all relevant evidence that an expert would use to set the value of the property.

Related: Not all fire insurance policies are the same: Valued vs. non-valued

Replacement cost means that the insurer will pay the cost to repair or replace after application of the deductible and without a deduction for depreciation.

In valued policy states, generally, insurance law requires that in case of a total loss to an insured building by a peril specified in the law, the amount stated in the policy declarations is considered the value of the structure at the time of the loss and is payable in full. If the value of the property at the time of loss happens to be less than the insurance coverage, the carrier can’t argue that the recovery should only be for the actual cash value.

As the residents of Tennessee learned in November 2016, the adjusting for the value of the property destroyed in Gatlinburg and Sevier County is much different than in a non-valued policy state.

Related: RCV vs. ACV: Know these loss claim settlement caveats

With the increasing threat of wildfire across the United States, it's important to know how your property — whether it's for your home or your business — will be valued in case of a total loss. The map below identifies valued policy states and their requirements.

Editor's Note: Green states on the map below indicate those with relevant "valued policy" laws. Scroll over each state for details.

 

Featured Video

Most Recent Videos

Video Library ››

Top Story

20 safest airlines to fly with in 2018

To recognize those leading the way, AirlineRatings.com released its annual list of the world's safest airlines. Of the 409 airlines it monitors, 20 stand out as the 'best of the best.'

Top Story

11 ways cars will be smarter in 2018

Connected vehicle technology, better electric batteries, and 'infotainment' systems are just three of the trends for insurers and claims specialists to watch.

More Resources

Comments

eNewsletter Sign Up

Agent & Broker Insider eNewsletter

Proven success tips and essential information to help agents and brokers grow their practice – FREE. Sign Up Now!

Mobile Phone

Advertisement. Closing in 15 seconds.