Author: Thomas Jackson

Licensed P&C agent for 23 years.

Insurtech Funding Reaches $4.4 Billion to Date in 2019, Blowing Past Full-Year 2018

Insurtech funding levels, reaching almost $4.4 billion in worldwide funding commitments through three quarters of the year, has already surpassed the 2018 full-year total, Willis Towers Watson announced Wednesday.

According to the new Quarterly InsurTech Briefing published by the global advisory, broking and solutions company, the $4.4 billion total deployed to insurtech companies across 239 transactions, marks a 5 percent increase from the total dollar amount of investment in all of 2018.

In addition, global funding eclipsed $1.2 billion for the fifth consecutive quarter during the third-quarter of 2019, Willis Towers Watson reported.

In the quarter, 83 deals with a total value of $1.5 billion were announced, up 6 percent over second-quarter 2019. Among the biggest deals, were “three “mammoth deals backing Root Insurance, Hippo, and PolicyBazaar,” the report said, highlighting continued interest in the property/casualty insurance sector. The report includes a “Transaction Spotlight” section, which examines recent fundraising rounds by Hippo, the California-based home insurance provider, and Root, the American app-based motor insurer.

Also contained in the report are counts of deals by type. With the overall deal count of 83 representing a 20 percent jump over second-quarter 2019 and a 46 percent leap above third-quarter 2018, the report also notes that while funding dollars are still largely going to digital distribution and full-stack carrier startups, Willis Towers Watson is increasingly counting deals that they classify as “B2B startups”—tech startups that sell software and technology to reinsurers or brokers. In fact, in the third quarter, half of all P/C deals were for B2B startups.

Separating Hype From Reality

The report begins with commentary on the use of the term “unicorn” to describe startups in the software or technology industry that are valued in excess of $1 billion. “If some market reports are to be believed, there could be dozens of insurtechs making unicorn status in the next 12 months,” the report states. “This begs the question, when something is no longer rare or even uncommon, at what point does the term ‘unicorn’ become misleading?”

“Rare as they are in the mythical world, we seem to be finding hordes of them roaming around in the InsurTech world,” commented Dr. Andrew Johnston, global head of Insurtech at Willis Re, on a video introducing the report, which raise questions about the terms “unicorn” and “insurtech” within its pages.

“An increasing number of insurtechs are amassing substantial valuations, and yet we are seeing relatively little value being added to our industry at scale, across the board,” Johnston wrote in the foreward of the report. He went on to question whether “a future herd of insurtech unicorns” will represent “a stellar cast of insurtech businesses, or an industry that is overvalued by transient capital [and] driven by a naivety of the potential impact of certain technologies.”

In short, he’s asks whether “we may well observe a widespread insurtech bust before long.”

Johnston said that a rigorous definition might require a company to employ “technology designed to squeeze out savings and efficiencies from an existing insurance model” in order to be called an insurtech. By that measure, many of the 2,500 now typically counted among insurtechs would not meet the criteria.

He said that the insurance industry now has “a serious case of magpie syndrome,” referencing a definition that associates chattering crows with individuals who collect indiscriminately. In short, he says, the industry is “chasing anything that glitters [and] not calling out poor insurtech businesses when we see them.”

“What we must…understand is that insurtech as it is today is as much about hype and entrepreneurial culture as it is about appropriate technology for the re/insurance industry,” he wrote.

Grasping at technology offerings to protect the insurance industry from the threat of disruption from the likes of Google and Amazon, carriers need to recognize that “a part of self-protection lies in us not confusing some technology with all technology,” he wrote. (Emphasis added.)

“Approximately $16.8 billion has been invested into ‘insurtech’ in the past seven years. Who can honestly say that we have seen at least $16.8 billion worth of value created?” he asked.

Beyond the Numbers

This quarter’s Briefing report also focuses on policy administration and central management systems, and features profiles of three insurtechs: RiskGenius, which uses AI techniques to understand the contents of an insurance policy; Canada’s ProNavigator, an AI platform to automate workflows that deploys natural language processing; and Britecore, a cloud-native administration platform delivered through Amazon Web Services.

Jason Rodriguez, Data Science lead at Willis Towers Watson’s Insurance Consulting and Technology Americas, contributes a chapter devoted to the value of policy administration for all insurers.

Writes Rodriguez: “Policy administration systems form the backbone of policy issuance. Over time, the process has become increasingly automated. With insurtech innovations, insurers are able to achieve a complex, bespoke information technology solution that fits their businesses by abandoning one-size-fits-all systems in favor of a mix-and-match approach. This allows them to shop for value in one functional area while investing in a best-in-class solution in another.”

The Quarterly InsurTech Briefing is a collaboration between Willis Re, Willis Towers Watson Insurance Consulting and Technology and CB Insights.

Source: Willis Towers Watson

Picking an Insurance-Friendly Car

As a general rule-of-thumb – the faster and flashier a car is the more expensive it is to insure.

In fact, the type of vehicle you drive directly influences how much you pay for auto insurance. Auto insurance is designed to protect you and your finances in the event of an accident. Because of repair and replacement costs associated with higher-priced sport and performance cars, less expensive vehicles like four-door sedans and mini-vans are cheaper to insure.

Flashy Cars = More Tickets

Speeding tickets also affect your premium costs. Police officers tend to hand out more speeding tickets to faster, flashier cars than others. In fact, just driving a red, green, or silver-colored vehicle is far more likely to attract attention than other colors.

Having speeding tickets on your driving record can dramatically affect your insurance premium costs in the long run.

If you are in the market for a new car, you can research which are more likely to be ticketed. A recent study of 1.7-million driving records by ISO Quality Planning drew some interesting conclusions. In summary, the study determined that Hummer and Scion owners are typically more likely to be ticketed while Chevy and Buick owners are not.

It’s easy to see why you should be pragmatic about choosing a style and color of vehicle as it relates to your insurance premiums. If you’re truly realistic about saving money on insurance, perhaps that low-key family four-door rather than the fire-engine-red convertible is a smart idea.

Safety First

Take a look at what kind of safety and security features your car has. Not only do they save your life and protect your car from theft, they can also save you money on your auto insurance.

If you are thinking of purchasing a new car, consider one with side-curtain airbags and anti-lock brakes. Remember that anything that is going to protect you and your passengers in the event of an accident can also possibly lower your insurance costs.

There are a lot new high-tech safety features now appearing on newer model automobiles. Some of the more noteworthy technologies that you may wish to consider are things such as tire-pressure monitoring, blind-spot detection, collision warning systems, rearview cameras, and many more!

Of course, before you start searching for options and high-tech ways to lower your insurance premiums, consider first starting with a safe car. Please check out our article Is Your Car Safe? for a rundown of some of the safest new 2009 vehicles being sold.

Beware Thieves

The best way to avoid getting your car stolen is to practice common sense.

First and foremost, don’t leave your car running unintended. You may think it’s only going to be 30-seconds but how much time does it really take for someone to get in and drive off with it?

If you have a garage or a locked gate, use it; otherwise if you have a driveway, park it there. In the case of college students or city dwellers, who live in areas where parking is often limited to curbside, be sure to park in a well-lit area, preferably where you can see it from your house.

Also, theft deterrent devices such as car alarms and VIN etchings also positively affect insurance costs. If the new car you’re purchasing isn’t equipped with an alarm system, you may want to consider installing one as the initial cost will likely defray the total cost of that extra insurance over the time you own your vehicle.

Finally, if you really want to protect your car, particularly if it’s a specialty vehicle, you should consider a GPS-based recovery system such as OnStar or Lojack. These systems are pretty efficient at quick vehicle recovery and on some newer systems, even allow for remote vehicle disabling to further thwart thieves.

Please check out our article Frequently Stolen Vehicles for a rundown of the more commonly-sought cars and trucks.

Things to remember after an accident

Say you’ve just had an accident. You’re probably confused, upset, and possibly scared. While these are natural feelings to have after a collision, it’s important to keep your wits about you and make sure you address 10 very important topics before making a claim.

Who was the other driver?
You’ll often hear that after an accident you should exchange information with the other driver. The question is what information? The answer is quite simple. At the very least you should make sure you copy down the driver’s name, address, driver’s license number, birthdate, and phone number.

Next, make sure you get their policy information including the name of the company, policy number, the policy’s start and end dates, phone number, and agent name if there is one.

Passengers
Write down how many people were involved, the vehicle or vehicles they were traveling in, and get their names as well as a basic descriptions such as sex, height/weight, ethnicity and so on. This is essential to help you if you are the unlikely victim of a staged accident or other attempt at insurance fraud.

The other vehicle or vehicles
Try to get the make, model, license plate and VIN number of the other car or cars.

Witnesses
Did anyone see the accident happen? If so, you’ll want to get their information to help the insurance company determine who in the accident is at-fault.

Police report
If a police report is taken, the insurance company is going to want a copy and that might take months so if you want the claim settled quickly, you’ll probably want to get a copy yourself and send it to them.

Where did the accident occur?
Note the location of the accident, number of lanes, whether it is one or two-way, pavement striping, which direction each vehicle was traveling, where each one was impacted, the lane each driver was traveling in, and finally any traffic-control devices in the area.

Take pictures
Photo-document all vehicles involved as well as the scene of the accident from all corners. If you are able to get a picture of all the involved parties, that is a great way of helping the insurance company identify all the individuals involved.

Vehicle condition
Make note of the vehicle’s condition immediately after the accident. Where is the damage and is it drivable? If there is any other damage unrelated to the accident, make sure to disclose that to the insurance company.

Repairs
If you have a body shop you want to use, make sure you have their information handy. You can also ask around for recommendations.

Often, the insurance company will have a list of body shops they can suggest. If they do, you should also inquire about costs, warranties, and any benefits that come with using their repair service versus another.

Write down everything
In addition to everything else you need to write down, be sure to keep careful notes during the claim process. When you speak to anyone on the phone, document their name, employee number, extension, date and time of the call, what they say, and any other piece of information you think is relevant to helping your cause.

The above-mentioned things are essential to making the claim process smooth and efficient. The insurance adjuster will want to resolve their claim in the least amount of time. Having as much information as possible is a great way to make that happen so your life can quickly return to normal.

Driver’s License Points Systems

State point systems
In most states, when a driver is ticketed for a moving violation such as speeding, running a red light, unsafe lane change, and so on, he or she gains points on their driving record.

In someone isn’t careful and they accumulate points during a short period of time, they can lose their driving privileges.

Points systems vary from state to state but the majority work one of two ways:

System 1: Ordinary moving violations are one point however, some violations such as excessive speed can acquire two points. Typically a driver’s license is suspended when a driver receives four points in a year, six points in two years, or eight in three years.

System 2: Two points are added for minor violations such as an illegal turn or speeding. Three or more points are added for more serious violations such as running a red light. A license can be suspended if the driver accumulates 12 points in three years.

Points can also be assessed for a driver who is found at fault in an accident.

Points and insurance rates
Insurance companies regularly review driving records and can raise premiums if a driver accumulates a certain number of points. Typically, the number of points depends upon a driver’s state and insurance company.

Often an insurer will allow one moving violation every 3 to 5 years. Anything beyond that will most certainly raise premiums and definitely so if the driver is found at fault for an accident.

Rates generally will go up twenty to thirty percent depending upon the number of points and/or the severity of an accident.

Avoiding and removing points
There are several ways to avoid or remove points:

  1. Contest the ticket
  2. Traffic school
  3. Defensive driving classes

Frequently Stolen Vehicles

NICB

Contrary to what would pass as conventional wisdom, the cars that most often are the target of thieves aren’t the most expensive or fanciest. According to the National Insurance Crime Bureau (NICB), which compiles information gathered by the FBI, the most oft-stolen cars in 2008 were as follows:

  • 1994 Honda Accord
  • 1995 Honda Civic
  • 1989 Toyota Camry
  • 1997 Ford F150 Series
  • 2004 Dodge Ram Pickup
  • 2000 Dodge Caravan
  • 1996 Jeep Cherokee/Grand Cherokee
  • 1994 Acura Integra
  • 1999 Ford Taurus
  • 2002 Ford Explorer

These cars are frequently targeted by thieves because of their value for harvesting parts. The NICB maintains a comprehensive state-by-state list on their website of the most oft-targeted vehicles. Their website also includes valuable information on top-stolen vehicles by model, year, and color as well as a state-by-state list of the top-25 stolen vehicles.

IIHS-HLDI

According to the Insurance Institute for Highway Safety and Highway Loss Data Institute (IIHS-HLDI), which compiles its figures based on number of claims filed for every 1000 vehicles insured, the most frequently stolen vehicles in 2008 are as follows:

  • 2005-2007 Honda S2000
  • 2005-2007 Dodge Durango
  • 2005-2007 Hummer H2
  • 2005-2007 Dodge Magnum
  • 2005-2007 Hummer H2 SUT
  • 2005-2007 Ford F-350 SuperCrew
  • 2006-2007 Dodge Charger
  • 2007 Cadillac Escalade
  • 2005-2007 Ford F-250 SuperCrew
  • 2007 Cadillac Escalade ESV

It’s important to note that these are overall figures and may not necessarily reflect your state, rather they convey an overall trend.

Car Theft and Insurance

Auto Insurance companies base their comprehensive coverage on several factors of which loss by theft is a major category. Commonly-stolen vehicles will typically see higher insurance premiums unless you take proactive steps to defray them with theft-deterrence.

How Insurance Premiums Are Figured

Auto insurance is a necessity you purchase in case some calamitous event befalls you in the future.

One may wonder how auto insurance companies figure premiums costs to cover future events that may or may not happen.

Auto insurance actuaries use several facts when determining auto insurance. The most important thing to bear in mind is that as claims payment costs rise so too do auto insurance premiums. So if an insurance company has to pay out more claims during a particular year, your insurer will consequently raise premiums to offset and recoup those losses.

Overall Factors

Medical expenses are one of the most pervasive costs for auto insurance companies. Every year millions of Americans are injured in automobile accidents and in each case, the associated medical bills often total in the thousands or tens-of-thousands of dollars. According to a recent report published by the Automobile Association of America (AAA), automobile accidents cost each American $1000 per year or just over $160-billion total.

While those costs may seem incredible, some experts say it could be even higher and obviously this adversely affects auto insurance premium costs.

Also, obviously affecting premiums are repairs, which are thought to cost close to $100-billion per year.

Thankfully, the cost to repair vehicles has dropped significantly since 1960; however, today there are a great many more drivers on America’s roads and highways. With such an increase in numbers, the likelihood of having an accident is greater and so too is the number of accidents occurring yearly.

Court costs also play a role in premiums. For each auto accident wherein liability is argued in court, the average cost awarded is over a quarter-of-a-million dollars.

Finally, auto theft plays a major role in premium costs as well. According to the Federal Bureau of Investigation, well over 1-million cars are stolen each year at an average cost to insurance companies nearing $10,000, which translates to almost $10-billion total. Luckily, some cars are more attractive to thieves than others, a fact you can use when choosing a new car.

You can read more in our article Frequently Stolen Vehicles.

Individual Factors

Other factors that you may or may not have control over are issues such as age, driving record, and whether you have taken driver education classes.

With age comes experience and insurance companies know this, which is why the older you get, the less you’ll typically pay in insurance premiums. Most policies offer reductions at age 21 or after 5 years of experience. Further reductions are also likely at age 24 or 25.

Sex also plays a role. Men are statistically more likely to have accidents so they are charged more for auto insurance. Married men receive a reduction, however, because they are perceived as being responsible to their families and thus less likely to have accidents.

Your driving record will also play a role in your auto insurance premiums. In fact, this is the one factor you have the most control over. By being a responsible driver, avoiding aggressive driving habits such as speeding, tailgating, and needless lane changes, you can minimize your chances of being ticketed and/or getting in an accident. Auto insurance companies all give some sort of safe driver discount.

Finally, if you take a driver education or defensive driving class, be sure to send your certificate of completion to your insurer. By learning to be a safe driver, you can often receive discounts. Classes like these may also help you expunge points from your record.

You can also get a discount if you’re in school and you maintain a high grade point average. Insurance companies see students with high grades as being more responsible.

Blood Alcohol Content

What is Blood Alcohol Content?
Drinking causes the concentration of alcohol to gradually rise in a person’s blood. This is measured as the Blood Alcohol Content (BAC) and is used to determine how intoxicated a person is for medical as well as legal purposes.

BAC determining factors
BAC is commonly based upon the number of drinks a person consumes however, this is a limited indicator because weight, sex, and body mass also affect BAC.

Eating food before drinking will also affect BAC since it slows down how long it takes the body to absorb alcohol. The effects of alcohol intoxication also depend upon a person’s tolerance.

BAC
For legal purposes, a BAC of 0.08% is sufficient for a DUI/DWI conviction in all 50 states. 0.08% is considered the point at which all adults are legally intoxicated.

A BAC of 0.15% to 0.20% is considered serious intoxication and will likely incur enhanced sentencing in DUI/DWI convictions.

A BAC of 0.35% and above is potentially fatal.

Number of Drinks
A drink is defined as one 12-ounce beer, one 3-ounce glass of wine, or one 1-ounce shot of hard alcohol.

While it’s already been noted that the number of drinks is a rudimentary way to determine whether a person is intoxicated, most adults can use the chart below to roughly gauge their personal level of drunkenness:

Numbers in italics represent an Impaired Driver
Number in bold represents a Legally Drunk Driver

WeightNumber of Drinks
123456789
1000.0320.0650.097.0129.01620.1940.2260.2580.291
1200.0270.0540.0810.1080.1350.1610.1880.2150.242
1400.0230.0460.0690.0920.1150.1380.1610.1840.207
1600.0200.0400.0600.0800.1010.1210.1410.1610.181
1800.0180.0360.0540.0720.0900.1080.1260.1440.162
2000.0160.0320.0480.0640.0800.0970.1130.1290.145
2200.0150.0290.0440.0580.0730.0880.1020.1170.131
2400.0140.0270.0400.0530.0670.0810.0950.1080.121

J.D. POWER STUDY ON INSURERS AND DATA: A MATTER OF TRUST

As insurance professionals, we’re always talking about harnessing new data streams to improve our products. The benefits are obvious, we tell ourselves – think of the potential to align prices with real risks! But sometimes, we also need to ask ourselves: do our customers actually want us to use these data? Do they like the idea of us scouring their social media footprints to help price their insurance coverage?

A recent J.D. Power survey asks exactly these questions – and found that we have a long way to go before our customers get comfortable with their personal insurance company collecting troves of their data. The survey found that 55 percent of customers don’t trust their insurance company to collect and use “alternate data”. Only 22 percent affirmatively trust their insurer. (Alternate data includes anything from driving behavior to social media; basically, anything that goes beyond what we traditionally consider insurance-relevant data, like age.)

But the issue is somewhat more nuanced than that. Customers are, unsurprisingly, more comfortable sharing data that they already share. Thirty-nine percent are okay with sharing utility, phone, or rent payment information.  And 45 percent are willing to share their driving data with an insurer.

This could actually be good news for insurers. It shows that customers might change their perceptions of trust regarding their insurer as they become more used to sharing the data. J.D. Power notes that “Initially, customers are more comfortable sharing alternative data they are more accustomed to sharing elsewhere. Driving data and its use in telematics or usage-based insurance programs is fairly common knowledge among customers.”

It’s when the data becomes more personal, like social media posts, that customers grow wary. Only 15 percent and 14 percent were willing to share online activity and social media data, respectively. And a sizable chunk (35 percent) isn’t willing to share any alternative data at all.

Additionally, insurance customers are sensitive about what their insurers are using their data for. For example, 65 percent think it’s reasonable for an insurer to use alternative data to help recover stolen vehicles; 63 percent for an insurer to tailor coverage; and 60 percent for more accurate premium pricing. But they become less accommodating when it comes to using data for things like marketing – 55 percent don’t think that’s a reasonable use of their data.

According to J.D. Power, customers are “jaded by the current overwhelming state of marketing, [so] insurers need to underscore the value” of the data their collecting to the customer. That means the responsibility lies with insurers to prove to their customers that the data collection is worth it.

Not surprisingly, even if a customer thinks it’s okay for an insurer to collect their data, the odds are good they’re worried about privacy. Fully 85 percent consider the risks of privacy and security breaches a disadvantage to sharing their data – even if they’re okay with sharing to begin with. And 74 percent think insurers should ask their customers before collecting and using their alternative data.

The upshot is that customer acceptance of alternative data is a gradual process. Customers want to know what data is being collected. They want to know how it’s being used. And if insurers can connect the dots for them – can demonstrate the value that the alternative data is bringing – then their trust and acceptance will grow. As the J.D. Power survey shows, this has already started happening with driving data. How this will play out with other alternative data will largely be up to how well insurers can prove themselves trustworthy data custodians.

Posted in Blog  • 

Insurance Rating Variables: What They Are and Why They Matter

Rating variables are a crucial tool used by actuaries to price insurance policies fairly and affordably. Rating variables are basically the characteristics of individual policyholders that can help approximate the cost of their risks. For example, in auto insurance typical rating variables include the driver’s age, their accident history and their vehicle’s model year. These variables have been shown to correlate with how likely a person is to be involved in an accident and what their expected costs might be. They are therefore used to help price that person’s risk.

Insurance companies have been using rating variables to help set rates (and thereby price their policies) for decades. However, the use of some rating variables has recently generated discussion within the United States. This joint educative statement by the Casualty Actuarial Society and the Insurance Information Institute is designed to help legislators, policymakers, the media and the public to understand:

  • How rating variables work;
  • How they are regulated; and
  • Why they are indispensable to keeping insurance prices fair and affordable.

Please click on the file name below to view the white paper in PDF format. You will need Adobe Acrobat Reader to view the file.

Download ratingvariables_cas-iii_wp072419.pdf

You can download Adobe Acrobat Reader, free of charge, from the Adobe website (https://www.adobe.com/products/acrobat/readstep.html).

Note: Printer fonts may vary by browser and version of Adobe Reader.

Understanding the insurance claims payment process

After a disaster, you want to get back to normal as soon as possible, and your insurance company wants that too! You may get multiple checks from your insurer as you make temporary repairs, permanent repairs and replace damaged belongings. Here’s what you need to know about claims payments.

The initial payment isn’t final

In most instances, an adjuster will inspect the damage to your home and offer you a certain sum of money for repairs, based on the terms and limits of your homeowners policy. The first check you get from your insurance company is often an advance against the total settlement amount, not the final payment.

If you’re offered an on-the-spot settlement, you can accept the check right away. Later, if you find other damage, you can reopen the claim and file for an additional amount. Most policies require claims to be filed within one year from the date of disaster; check with your state insurance department for the laws that apply to your area.

You may receive multiple checks

When both the structure of your home and your personal belongings are damaged, you generally receive two separate checks from your insurance company, one for each category of damage. If your home is uninhabitable, you’ll also receive a check for the additional living expenses (ALE) you incur if you can’t live in your home while it is being repaired. If you have flood insurance and experienced flood damage, that means a separate check as well.

Your lender or management company might have control over your payment

If you have a mortgage on your house, the check for repairs will generally be made out to both you and the mortgage lender. As a condition of granting a mortgage, lenders usually require that they are named in the homeowners policy and that they are a party to any insurance payments related to the structure. Similarly, if you live in a coop or condominium, your management company may have required that the building’s financial entity be named as a co-insured.

This is so the lender (and/or, in the case of a coop or condo, the overall building), who has a financial interest in your property, can ensure that the necessary repairs are made.

When a financial backer is a co-insured, they will have to endorse the claims payment check before you can cash it.

Depending on the circumstances, lenders may also put the money in an escrow account and pay for the repairs as the work is completed. Show the mortgage lender your contractor’s bid and let the lender know how much the contractor wants upfront to start the job. Your mortgage company may want to inspect the finished job before releasing the funds for payment to the contractor.

If your home has been destroyed, the amount of the settlement and who gets it is driven by your policy type, its specific limits and the terms of your mortgage. For example, part of the insurance proceeds may be used to pay off the balance due on the mortgage. And, how the remaining proceeds are spent depend on your own decisions, such as if you want to rebuild on the same lot, in a different location or not rebuild at all. Tthese decisions are also driven by state law.  

Your insurance company may pay your contractor directly

Some contractors may ask you to sign a “direction to pay” form that allows your insurance company to pay the firm directly. This form is a legal document, so you should read it carefully to be sure you are not also assigning your entire claim over to the contractor. When in doubt, call your insurance professional before you sign. Assigning your entire insurance claim to a third party takes you out of the process and gives control of your claim to the contractor.

When work is completed to restore your property, make certain the job has been completed to your satisfaction before you let your insurer make the final payment to the contractor.

Your ALE check should be made out to you

Your check for additional living expenses (ALE) has nothing to do with repairs to your home. So, ensure that this check is made out to you alone and not your lender. The ALE check covers your expenses for hotels, car rental, meals out and other expenses you may incur while your home is being fixed.

Your personal belongings will be calculated on cash value, first

You’ll have to submit a list of your damaged belongings to your insurance company (having a home inventory will make this a lot easier). Even if you have a replacement value policy, the first check you receive from your insurer will be based on the cash value of the items, which is the depreciated amount based on the age of the item. Why do insurance companies do this? It is to match the remaining claim payment to the exact replacement cost. If you decide not to replace an item, you’ll be paid the actual cash value (depreciated) amount for it.

To get replacement value for your items, you must actually replace them

To get fully reimbursed for damaged items, most insurance companies will require you to purchase replacements. Your company will ask for copies of receipts as proof of purchase, then pay the difference between the cash value you initially received and the full cost of the replacement with an item of similar size and quality. You’ll generally have several months from the date of the cash value payment to purchase replacements; consult with your agent regarding the timeframe.  

In the case of a total loss, where the entire house and its contents are damaged beyond repair, insurers generally pay the policy limits, according to the laws in your state. That means you can receive a check for what the home and contents were insured for at the time of the disaster.

Posted in Blog  •