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1175 S Huron St.
Denver, CO, 80223

Office: 303 437-4075
Sales: 303 525-6523
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Understanding Insurance Settlements


      Insurance settlements can be very confusing. Typically, the settlement is broken down into sections for the roof and each elevation (side) of the main structure. These sections are repeated for each separate building like detached garages, barns and very large storage sheds. After all buildings are listed, personal property will then be addressed.

      Each section will contain one or more line items for that area. The roof, for example, will contain lines for roofing removal, replacing shingles, installing underlayment, drip edge, etc. There may be 25 or more line items per section. Sections for the elevations will typically list gutters, windows, siding etc. as needed to identify all damaged components. Some items may be lined out or grayed out indicating payment for these items are available once the job is complete.

      In addition to the sections for the physical components and personal property, there will normally be a section listing trash removal, labor minimums and other items to round out the job. If it is a complex claim requiring skills from various trades to be coordinated, there will often be overhead and profit sections.

      Each line item will show the units and volume of the item such as 100 LF (linear feet) or 24 SQ (Squares = 100 sq ft) There will also be columns for RCV (Replacement Cost Value), ACV (Actual Cash Value) and Depreciation. A column for taxes may also be included

      RCV lists the value that the adjuster determines will replace the given item at current market prices. Replacement value is to replace the item with the same item as before, even though that item may be obsolete or no longer code compliant. ACV indicates the current value of the item based on age and general condition – not considering the damage that initiated the claim. Depreciation is the difference between the replacement cost and actual value.

      The initial settlement may have several sections that recap the main body in various ways. Depending on the insurance company, they may show tables with totals by section, or by trade involved etc. There will also be a section that recaps the overall financial picture. For example, you may see the following:

     
RCV:$10,000.00
Depr:$3,000.00
ACV:$7,000.00
Deductible:$1,000.00
Total Claim: $6,000.00


      Based on the above numbers, you will get an initial check for $6,000.00. In this example, your contractor will replace the roof for $10,000.00, collect the ACV for $7,000.00 and the $1,000.00 deductible and submit a claim to the insurance company for the remaining $3,000.00. The insurance company will send you another check for this $3,000.00 and you will then pay the contractor the remaining $3,000.00.

      Initial settlements are often just a quick assessment by an adjuster who may or may not be from the local area. Quite often the adjuster is unfamiliear with current building codes required for your county.Colorado Home Renewal (and many other contractors) will go through a process known as “supplementation”. This process identifies critical components that the adjuster left off. Items may be left off due to lack of local knowledge, or perhaps due to the adjuster being in too much of a hurry to finish the job so he can leave town and go back home, where ever that may be.

      Supplementation also ensures a fair price is paid for materials and labor. Some insurance companies initially only allow $350 or so to replace a skylight when the actual cost may be closer to $750, or they may allow $500 to remove an array of solar panels when the owner is under contract to have them removed by a particular company for a cost of $2,000 or more. Supplementation ensures full payment for situations like this.

      Only about 15% of claims are complete on the first pass. All claims will increase by the cost of the permit, but often claims will increase by several hundred or even several thousand dollars. This increase pays for things the contractor has to do anyway to meet building code requirements, and often is the only thing that allows the contractor to make a profit on the job.

      In the above example, once the job is complete and supplemented, the total cost may be closer to $12,000.00. In this case the contractor will submit an invoice to your insurance company for $5,000.00, as agreed to by the insurance company during the supplementation process. The insurance company will issue a check for this amount, and the contractor can then be paid the true replacement cost value (RCV) of the job.


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