In today’s blog, we’ll review some of the basics of insurance here in Connecticut.
First, if it’s at all possible, don’t let your CT insurance policies lapse. Even if you’re not driving your car and you don’t think you need a policy, it’s often best to just the suspend the coverage (remember not to drive the vehicle when coverage is suspended) for a few months. Although there will still be some premium due to the carrier, the premium will be negligible. And when you’re ready to reinstate coverage, you won’t be going to a new carrier with “no prior”. And if you don’t have a car, if you can at least be listed on another policy as an operator, that’s better than “no prior”.
It’s the same for Connecticut home insurance. Try not to let your coverage lapse. If you do, it could be difficult to obtain coverage at a favorable rate and/or in the standard market.
Second, be honest on the applications. There’s no sense in having a policy and then when a claim occurs, having it denied because a material fact turns out to be different than what was disclosed on an application. For example, you have a rental property with tenants and yet you told the insurer that it was an owner occupied primary residence. A claim could be denied. Ain’t nobody got time for that.
Third, let’s look at a few definitions…replacement cost, expanded replacement cost, guaranteed replacement cost, functional replacement cost, actual cash value, and personal property replacement cost.
Replacement Cost (RC or RCV) – a loss settlement option available on most Connecticut home insurance that allows you to collect a settlement equal to what it would actually cost to rebuild the house using the same material that was used in the original construction. Often, this coverage is only available if you’re insured 100% to value.
Expanded Replacement Cost – similar to replacement cost except you get an additional % above and beyond what your house was insured for. For example, you have a dwelling limit of $250,000 with a 25% expanded replacement cost. In the even that a loss ends up costing more than 250K, you have up to $312,500 in this example to rebuild your house (i.e., $250,000 x 1.25). This may come in to play if the cost to rebuild your house is higher than expected after a loss. Perhaps there was a hurricane which affected a lot of homes and more homeowners than usual need building material all at the same time. In that case, the laws of supply and demand would increase the cost of the building material and you’ll be happy you have the coverage.
Guaranteed Replacement Cost (GRC) – similar to expanded replacement cost above but there’s no cap. If you were insured at $250,000 and it cost $480,000 to rebuild your house, the insurer would have to honor pay. This coverage is not available on most policies and often isn’t necessary (assuming a proper replacement cost evaluation was performed and some expanded coverage is afforded) but gives an extra peace of mind for those who need extra assurance.
Functional Replacement Cost (FRC or FRCV) – similar to replacement cost above but uses modern building materials to rebuild with. For example, an older house was originally constructed with lath and plaster. If there was a loss, the insurer would pay for drywall instead. Some carriers will only offer functional replacement cost if the building is older, either that or ACV.
Actual Cash Value (ACV) – is replacement cost minus depreciation. It’s similar to how an auto policy pays out, i.e., the blue book or actual cash value minus your deductible. With regards to property insurance, though, it’s not as favorable as replacement cost because you almost never get enough to make repairs without having to reach into your own pocket.
Personal Property Replacement Cost (PPRC) – same as replacement cost above but this is for your personal property. For instance, you have a 40” flat screen that cost $3,500 when you bought it seven years ago. However, it’s worth $800 now. Without personal property replacement cost on your policy, you would only get $800 – minus any applicable deductible. With the coverage, however, the insurer would give you enough to go out and buy a new 40” flat screen.
If you have any questions about your personal and/or commercial insurance programs or just want the best coverage at the most competitive rate available, gives us a call at 860-529-1737 or email us at email@example.com.