The What, How & Why

What is a Replacement Cost Estimator? How is it calculated? Why it’s important!

In order to understand why having a Replacement Cost Estimator is important, you must first understand what Replacement Cost Coverage is.

Replacement Cost Coverage (RC)

Simply that, replacing what you had. When you have Replacement Cost Coverage and something like a fire or tornado damages your home, your insurance will repair, or replace, what’s damaged with like kind and quality materials.

Calculating Replacement Cost Coverage

While we are not contractors or appraisers, we do have access to the latest software to calculate the coverage amount needed to rebuild your home. This software is called a Replacement Cost Estimator (RCE). We gather information such as year built, construction type (brick versus frame), square footage, and finish quality and input it into the estimator. The software then uses today’s material and labor costs to calculate an approximation of what it would cost to rebuild your property, should the unthinkable happen.

This number has nothing to do with market value. In fact, almost always this number will be more than the market value of your property. We are trying to calculate what it would cost to rebuild your property from the ground up, not what it could be sold for.

It’s Important!

Without Replacement Cost Coverage on your property, insurance companies will apply depreciation based on the age and condition of the damaged property (Actual Cash Value), in the event of a loss. This can result in a partial loss payment leaving you to cover the rest. Picture this, a storm blows through and you have shingles and siding blow off. You call your insurance agent to report the claim and turn in your contractors estimate of $15,000. Because your roof and siding was 20 years old at the time of the storm, the claim adjuster determines that the damaged shingles and siding are only worth $4,500. Your home has a $1,000 deductible, so the check from the insurance company is $3,500. This leaves you with a $11,500 bill! Now, imagine that same scenario with Replacement Cost Coverage. You get a check from the insurance company for $14,000, the $15,000 estimate, minus your $1,000 deductible and just like that, your home feels like home again.

Although the kind of Replacement Cost Coverage you have can vary (click here for a list), they all start in the same place, with a Replacement Cost Estimator.

To make sure you have the coverage you need, call one of our agents at 419-332-2311, send us an email or stop in today!