Covering your losses.
What is replacement cost?
Replacement cost is a provision in most homeowners and many business policies that reimburses you the full cost of replacing contents lost or destroyed as a result of a claim. This also includes HST unless you are an HST registrant business owner in which case you would claim the HST back when you do your annual HST submission.
I heard the adjuster make reference to “actual cash value”. What is that?
Actual cash value is the value of an item after depreciation for age is applied.
How is “actual cash value” Determined?
For example; a 7 year old TV that has a 14 year useful lifespan has an actual cash value of 50% of the same item brand new. If the new TV cost is $800 before taxes, then the actual cash value of the TV is 50% or $400.
How does an adjuster settle the claim?
Initially the adjuster will settle your claim based on actual cash value. For those items you do replace, upon submission of the replacement invoice, you will be paid the difference between actual cash value and the replacement cost invoice.
Can you show me an example?
Let’s take that same 7 year old TV. The adjuster gave you $400 for the TV. The invoice to replace the TV with the closest model was $800 plus $104 in HST = $904. You were paid $400 based on actual cash value. Upon receipt of the invoice you will receive $904 less the funds advanced ($400) = $504.
Is there a time limit on when I must replace contents?
Generally one year from the date of the loss, but some carriers have shorter time frame requirements. You should always check with your adjuster to be sure.