Recovering and Rebuilding After A Disaster

Image: Home Destruction from Tornado

Spring can bring storms, high winds and even tornadoes.  Fires are likely any time of year. There are a variety of ways your home can be damaged to the point that you have to file an insurance claim. We hope that doesn’t happen to you, but if it does, it might be helpful to know the difference between replacement cost and restoration cost.

Your Home
Let’s say there’s been a tornado and the roof was blown off your house. Your insurance company’s adjuster estimates the damage, then depreciates the cost based on the fact that the roof was already 10 years old. For example, the adjuster determines that a new roof will cost $10,000. Because of its age, we might pay you $7,000 minus your deductible. If that is $1,000, the amount Shelter pays would be $6,000. This is the actual cash value of the repairs.

If there are any cost discrepancies after your contractor reviews your estimate, you should contact your adjuster to discuss those differences and come to an agreed value. When the work is complete, you can submit your paid receipt to us and we may pay the additional cost incurred. This is the restoration cost.

Your Personal Belongings
In that same tornado, some of your furniture and electronics were ruined. For example, let’s say you lost a TV. It had a useful expected life span of 10 years and it would cost $800 to buy one of comparable value. You have owned your TV for five years, which is half its life span, so the covered amount for the TV is $400. Your homeowners insurance will likely cover this loss, but unless you purchased restoration coverage, you will likely only receive a check for the market value of the TV (minus your deductible) based on the expected life span of the TV and how long you have owned it. However, if you purchased restoration coverage with your policy, you can submit your receipt for the cost of a comparable new TV and you may be reimbursed for the difference.

Other Personal Items
Something to keep in mind—you might want to insure your more expensive personal items like jewelry, guns, golf clubs, etc. under a personal articles policy instead of your homeowners policy. A personal articles policy offers more flexibility than a homeowners policy when it comes to these items. For instance, if you cover your jewelry under a homeowners policy, it can only replaced if your loss is due to a named peril such as fire, theft, tornado, etc. But if you simply cannot find your wedding ring and think it may have fallen off somewhere, that loss would not fall under the category of a named peril. If it’s insured under a personal articles policy, which is an open peril policy, it may be replaced. 

Insuring your extremely valuable items under your homeowners policy instead of a personal articles policy may also limit the amount of money you have left to buy essentials that are lost in a fire, tornado or other catastrophic event. Your homeowners policy will only cover your personal property up to the limit of coverage, so one expensive item could really eat into what you have left to replace things like towels, dishes, furniture, etc. Using a personal items policy to insure jewelry, guns, art, sporting equipment, etc. means you’ll have more money to replace household items. It’s worth talking to your agent about this coverage.

As is the case will most insurance coverage, there are limitations and restrictions, so you will have to consult your policy or ask an agent for details about your situation.

The product information contained on this website is informational only and not a statement of contract. All coverage options are subject to the provisions of the policy purchased and details of the policyholder’s situation.

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