Homeowner's Insurance Settlement and Recoverable Depreciation

[jcramsey]

Finally heard back from my insurance adjuster with the settlement letter for our claim. Total settlement amount is around $10k, minus $500 deductible and $2000 Recoverable Depreciation which is payable after repairs have been completed. Below is the language of the settlement letter. Am I reading this correctly that Recoverable Depreciation is only obtainable if the repairs cost what my insurance adjuster has estimated them to be? In other words, if I can get it done for less, I won't get that extra $2000?

"Recoverable Depreciation (if any) that has been applied to the loss means that
once the repairs have been completed you will need to submit itemized receipts or
invoices from your contractor along with a signed contract showing that those repairs
have been finished and the actual cost of such repairs.
Your policy provides for the actual cost of the repairs less your deductible and any
non-recoverable depreciation up to the amount of coverage. Should the actual repairs
be less than our estimated costs, the final payment due, if any, will be based on the
actual cost incurred to repair or replace your property."

 

[Ron]

Correct. Insurance is intended top make you whole, just as you were before the event, not to allow you to profit.
So they will pay for actual repairs minus deductible and no more.
Or you can claim recoverable depreciation, that the damage reduced your homes value by 2k, and you can collect a check for 2k and no more and its up to you whether or not you repair.

 

[Tim88XJ]

I recently went through a small water damage claim- nearly the identical dollar amounts you've described. It was explained to me that I would have to provide receipts (not invoices) equal to, or in excess of the total amount of the claim (plus deductible) to obtain any of the recoverable portion. My understanding is it exists to discourage people from collecting money and not making repairs, or for whatever reason discouraging homeowners from making their own repairs. I personally did my work myself and was happy with the results even without ever being able to collect any of the "recoverable portion." I am by no means a perfectionist but I am rarely satisfied with any of the work I have hired people to do on my home.

Remember to not think of it as a handout, this is an insurance claim and it is the reason you pay your premiums. That was a bit of a hurdle for me to get over but that is what you have insurance for, no reason for you to feel like they are doing you a favor.

The biggest advice I can offer would be to tell them you do not accept the initial estimate and/settlement. Mine was 30% lower than 3 legitimate quotes I had received from local companies. My adjuster tried to get me to accept it and begin work under the premise of "Dont worry if it costs more we'll cover it". I told them I was not willing to move forward with any repairs until a settlement was reached that I was agreeable to as I "Couldn't afford to float any costs in excess of the repairs minus the deductible." Although this wasn't exactly true, it worked out in my favor in the long run.

-Tim

 

[Tim88XJ]

Correct. Insurance is intended top make you whole, just as you were before the event, not to allow you to profit.
So they will pay for actual repairs minus deductible and no more.

Although I understand this, it is implying that Jeremy's time is valued at zero, regardless of how qualifed he is or isn't to make the repairs himself. Also insurance is to cover the value of what was lost/damaged.

 

[Ron]

Although I understand this, it is implying that Jeremy's time is valued at zero, regardless of how qualifed he is or isn't to make the repairs himself. Also insurance is to cover the value of what was lost/damaged.

My comment wasnt my personal opinion, but the viewpoint of the law.
I disagree with the law but, only in the sense that I think mandated insurance should be illegal.

If he is legally qualified, IE licensed, he can value his time however he wants and collect on the same.

 

[rockcity]

Yes. Homeowners policies (at least the ones I’ve seen) are base on replacement costs, not what you value it at. So, if their estimate is $10k and it actually cost $5k, then they pay $5k. Recoverable depreciation is usually a % of the estimated cost to repair, so that amount may adjust as well.

on the flip side, if they estimate $10k to fix, and it costs $15k, then they cover that cost, although I’m sure they would question and audit it quite a bit.

Although I understand this, it is implying that Jeremy's time is valued at zero, regardless of how qualifed he is or isn't to make the repairs himself. Also insurance is to cover the value of what was lost/damaged.

Insurance covers replacement cost of what was lost or damaged. This is why receipts are necessary. Value can be subjective. Replacement costs incurred to restore to the before condition is not.

 

[jcramsey]

Appreciate the comments/info. Here's a little more detail. I received a quote from ServiceMaster for approximately $10k to repair. That was about $4000 more than I expected the quote to be, and a lot more than it would cost me to replace a couple pieces of sheetrock and <600 sq ft of laminate floating floor by myself. They sent in a detailed estimate w/ photos, etc to my insurance. Insurance agreed w/ the estimated repair cost. I just got the letter stating a check would be sent to me but made out to my mortgage company, minus the $500 deductible and $2000 Recoverable Depreciation amount. Doesn't seem to me like they would cut me a check for $8,000, but if it only costs $5,000, that they will request the $3000 back...or maybe they would?

Yes. Homeowners policies (at least the ones I’ve seen) are base on replacement costs, not what you value it at. So, if their estimate is $10k and it actually cost $5k, then they pay $5k.

 

[ramjo]

Appreciate the comments/info. Here's a little more detail. I received a quote from ServiceMaster for approximately $10k to repair. That was about $4000 more than I expected the quote to be, and a lot more than it would cost me to replace a couple pieces of sheetrock and <600 sq ft of laminate floating floor by myself. They sent in a detailed estimate w/ photos, etc to my insurance. Insurance agreed w/ the estimated repair cost. I just got the letter stating a check would be sent to my mortgage company, minus the $500 deductible and $2000 Recoverable Depreciation amount. Doesn't seem to me like they would cut me a check for $8,000, but if it only costs $5,000, that they will request the $3000 back...or maybe they would?

If I have to help, you probably gonna have ask them fo' mo' money....

 

[jeepinmatt]

I disagree with the law but, only in the sense that I think mandated insurance should be illegal.

QFT