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Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, without deducting for depreciation. Depreciation is the decrease in home or property value since the time it was built or purchased because of age or wear and tear. Many insurers require homeowners to insure their homes for at least 80 percent of the replacement cost. If the homeowner fails to insure for at least 80 percent of the replacement cost, a penalty is applied to partial losses. For example, if it would cost $50,000 to replace your home and it is insured for $40,000 (80 % of its replacement value), and a fire causes $25,000 worth- of damage, then your insurance company win pay the full $25,000. On the other hand, if your $50,000 home is insured for $30,000 (which is less than 80 % of its replacement value), and you suffer a $25,000 loss, your company would pay for only part of the loss. You would have to pay the balance out of pocket.

You may settle personal property and structure claims at separate times. Filing separately allows you to take more time if necessary to determine the full extent of your losses. If you and your company cannot reach a settlement figure satisfactory to both of you, both parties may hire an appraiser in order to come to a compromise on a figure. You split the cost. If you and the company still disagree, you may hire a third appraiser called an "umpire." The decision of any two of these people is binding. It is advisable to use your settlement for its intended purpose, that is, for the repair of your home or the replacement of its contents. Unless the cost of repairs is a small amount, your insurance company may initially pay you a sum equal to the actual cash value. It will withhold the balance of the full replacement cost amount until after the repairs are completed.

Jim is a former Region V Vice President of the National Association of Health Underwriters (NAHU), a past president of the North Carolina chapter of NAHU and founding president of the local Fayetteville association (now known as the Sandhills Association of Health Underwriters). NAHU is an organization dedicated to serving the public by promoting the activities and ethical conduct of insurance professionals through communication, education and legislative representation. While serving in his NAHU capacity, Jim received recognition as NCAHU Member of The Year in 1997, NAHU's Distinguished Service Award in 2002. In 2003 he received NCAHU's highest award, the Fredrick W. Joyner Distinguished Service Award. He has been an Honor Council Member and a Lifetime Member of the Leading Producer Round Table since 1995.

When your insurance company pays for a loss caused by another driver, your company may have the right by law or policy provision to recover an amount of the loss from the other person or their insurer.

If the replacement cost of your home is increasing with inflation, your policy limits must be periodically increased to maintain your coverage at 80% or higher. Even though the amount of homeowners insurance you carry is at least 80% of your home replacement cost, this amount of coverage may not be enough in the future. To aid you in keeping coverage at an adequate level, some companies offer an "Inflation Guard Endorsement." This endorsement will allow your insurance company to automatically change your policy limit during the policy period. Normally, the higher premium is not paid until the time of renewal. Even if you have this endorsement on your policy, you should check your coverage limits periodically to make sure you are adequately, but not excessively, insured. Not all companies offer this endorsement, so check with your agent or company if you are interested in purchasing it.

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