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How does the insurance company determine the payment of compensation for the claim?


It is common among homeowners that if they are at a loss, they are very concerned that their insurance compensation will amount to making the necessary repairs and replacing their damaged property. It is important to know as a consumer how this compensation is calculated and the factors that affect before  an event occurs, so that you can get adequate resources.

First, there is a portion of the damage or replacement costs that you must pay personally. This part is known as an opponent. That is, before the insurance company makes a payment, part of the damage is your responsibility. It is common to calculate the amount deducted from the policy as a fixed amount or as a percentage of your total policy coverage.

For example, if your homeowners' insurance policy is $100,000, you may have a deductible $1,000 per event or a percentage of $100,000, for example 2%. In other words, let's say you have damage sought to pay a down payment of $2,000, then the company will pay you the rest of the damages, in principle, the remaining $8,000.

It is also customary that depending on the type of claim you are facing, the deductible amount varies. This is usually the case for coverage against damage caused by storms, wind, hail and hurricanes, which generally enjoy a higher discount than in other claims (fire, theft, explosion, etc.

Replace or cover the actual value

The appropriate type of coverage of your document will affect your compensation amount. Determining which is correct depends on your specific needs.

There are two types of coverage: replacement coverage, which provides funds to replace your property with the same type, quality and value of lost property;

It's easier to see the difference with a numerical example. Let's say lightning hits a tree in your backyard and shatters your kitchen ceiling, shattering the fireplace and fridge you bought five years ago.

If you have replacement cost coverage, insurance will pay you for the new stove and refrigerator, in the same style and quality you have lost. That is, if your refrigerator is 22 square feet, you will be paid to buy one of this size (not larger, but it won't be smaller either).

However, if you purchase real cost or current value coverage, the replacement price for your kitchen and refrigerator will be subtracted by the amount of depreciation, i.e. no longer valued during the five years you have used them. Let's say the price of the refrigerator was $1000 and that consumption over the five years was $500. You will only receive $500 for your refrigerator and you may need to put the rest of the money out of your pocket to buy an alternative refrigerator. The decision is yours, of course, if you want to buy a new refrigerator just like the one you own or cheaper ...

The same applies to your ceiling repair funds. If you have replacement coverage, the replacement amount will be charged for similar coverage without deducting the consumption of the time you used your roof (home building years). If you have real cost coverage or real value, the price of replacing the ceiling will be deducted by a percentage of depreciation.

From this perspective, choosing one type of coverage or another type can put you at a disadvantage if you choose to cover the real cost. It is true that if you choose this style when buying the policy, you can save a little money on the premium, since it is usually at least 10% less expensive, but you should consider whether this discount is worth because you risk losing a lot right now disaster, because of the consumption of their property

Cover the guaranteed replacement cost
There is another type of more comprehensive replacement cost coverage, known as guaranteed replacement cost coverage. As the name suggests, this type of coverage ensures that you will be able to rebuild or repair your home just as it was before any loss, ensuring that the funds needed to do so are included in your insurance compensation. This type of broader coverage is not always available and will depend heavily on the insurance company and other aspects of your home.

What you should remember is that it will not provide you with any kind of coverage, not even the most comprehensive, money or compensation to replace your damaged home or damaged property with greater luxury or more than you had before.

Extended replacement coverage
You can purchase additional coverage in advance in case of a larger-than-expected loss when faced with repair or replacement of the loss. For example, your home is under fire and you realize that to rebuild it as before, the construction costs in the area are very high and will cost you much more than the insurance will pay you. If you extend the replacement coverage, you will add up to a percentage of your coverage to your compensation, for example 20% more, so you won't have to use pocket money to complete the reconstruction.

This extended coverage may cost you a little more than a typical replacement cost, but if you live in an area where construction costs are constantly increasing or growing, you may or may not want to if you have to rebuild or repair your home, the costs will exceed typical replacement estimates.

Policies for mobile homes or mobile homes
Not because your home is a mobile housing cart or mobile home, it is less important for you to enjoy the protection of your investment and your family's roof. It is recommended that you have a special insurance policy for the owners of this type of dwelling known as the amount stipulated in the policy (specified amount).

However, the amount you will receive in the event of your home being destroyed is the amount specified or stipulated in the contract when the document is issued. In this type of policy, consumption is not taken into account to calculate the amount of the claim. If you decide this policy, check the amount of coverage each year when you renew it to make sure you can replace your home if it is destroyed. Check with your mobile home dealer to find out the current value of a new home similar to yours to determine the coverage you need.