How to read insurance claim settlement?
Reading an insurance claim settlement is easy as 1-2-3 using this basic formula:
- Recoverable Cost Value (RCV)
- – Depreciation
- = Actual Cash Value (ACV)
Recoverable Cost Value is the replacement value of an asset. Depreciation is the reduction in value of an asset due to its age and condition. Actual Cash Value is the fair market value of the asset.
Payment of insurance claims is not a "settlement," and this is a term that is often incorrectly used. It is important to note that Texas Insurance Code 541.060 prevents insurance companies from requiring a homeowner to sign a release when they pay their claims. Insurance companies very frequently underpay valid insurance claims. Also, insurance companies frequently over depreciate insurance claims. In conclusion, after an insurance company initially pays its claim, homeowners are allowed to hire an attorney to go back and ask for more.
In evaluating the insurance claim settlement, here are some questions you should ask yourself:
- Did the insurance company deny any portion of my claim?
- Did the insurance company pay overhead and profit?
- Was the insurance company too aggressive with depreciation?
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