Residential Insurance

State of California Department of Insurance 17 This depends on whether your policy is a replacement cost value policy or an actual cash value policy. If your policy is an actual cash value policy, it may not. Actual cash value recovery is determined as follows: (1) in case of total loss to the structure, the policy limit or the fair market value of the structure, whichever is less, or (2) in case of a partial loss to the structure, the amount it would cost the insured to repair, rebuild, or replace less a fair and reasonable deduction for physical depreciation , or the policy limit, whichever is less. If you have a replacement cost policy, the chances that you will be able to completely rebuild your home are better; however, there are many types of replacement cost policies, so you need to be careful to purchase a replacement cost policy that best meets your needs. A policy cannot be sold as a “guaranteed replacement cost” policy unless it will pay to completely rebuild the home regardless of the coverage limit. Other types of replacement cost policies will pay your policy limits, plus a certain percentage above those limits. Some policies do not have building code upgrade (ordinance or law) coverage. Cities and counties periodically change their building codes. Unless your policy has this coverage, your insurance company may not pay for changes youmayneed tomake to the structureof your home tobring it up to current building codes. As discussed earlier, your agent, broker, or insurer can assist you in establishing a limit that is adequate to rebuild your home. It is important to update that limit periodically to maintain a limit that reflects current construction costs. You may want to ask your agent, broker, or insurer if they automatically review or increase limits on a regular basis or if they offer an automatic inflation guard option that increases limits according to current inflation rates. Will My Policy Completely and Totally ReplaceMy Home If It Is Destroyed?