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Home Insurance Video Series: What is the Difference Between Replacement Cost And Depreciated Wall?

Joseph Coupal - Tuesday, February 18, 2020

The Crackman, Rich Comeras, as a public service, shares common questions that homeowners have regarding a wide range of homeowner insurance coverages. Today he is joined by his friend, Peter Marshall, from Marshall Insurance where they discuss the difference between replacement and depreciated value.

Rich: Hi, this is Rich from A1 Foundation Crack Repair, here with my friend, Peter Marshall from Marshall Insurance. Thanks for being here. 

Peter: Thank you.

Rich: A question that comes up regularly is, as it relates to insurance is, what is actual replacement cost versus depreciated value replacement cost. Tell us the difference and what people should look for, and look out for, and be aware of.

Peter: Sure. So nowadays, the standard homeowner’s policy covers the house on a replacement cost basis. And what that means is they’re not accounting for depreciation, it’s whatever the cost is to rebuild the house today, to put up the same house that was there prior to the loss, whether repairing the damage with similar materials as were there before the loss. With actual cash value there’s depreciation, so if the house is 20 years old and the house burns to the ground, you’re not going to get the full replacement cost, the cost of labor and materials to rebuild the house. What you’re going to get is that, minus 20 years’ worth of depreciation.

Rich: It’s kind of like, you buy a piece of wood, a 2x4 for $4 or $5 today, back when the house was built it was only $2. There’s a difference in price and it equates also to the replacement of the house.

Peter: Correct. Right.

Rich: So, you want to make sure you would have replacement cost.

Peter: Yeah, and if you are with a standard insurance company, such as Travelers, or Safety, Norfolk & Dedham, you’re automatically going to have replacement cost on the dwelling. It’s not a question. The only time you wouldn’t have replacement cost, is if you are with a non-standard company. And the only time you would be with a non-standard insurance company is if there’s an issue with the home, such as, it suffered damage and you never repaired it, or the electrical system hasn’t been updated, or the roof needs to be repaired, then you can’t get standard insurance and then you would likely have actual cash value.

Rich: Sounds good. Thank you for your information, Peter.

Peter: Thank you, Rich. 

If you have a basement water problem and think you need a professional, or, if you’d like more information on foundation repair and waterproofing topics, please visit A1FoundationCrackRepair.com or call Rich at (866) 929-3171. Or you can email rich at info@a1foundationcrackrepair.com. Thanks for watching and keep that basement dry.


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