The Basics of Property Values and Coinsurance Conditions

Description

Replacement cost ain’t always replacement cost. Yes, I know that is poor English – but the point is, replacement cost isn’t as simple as new stuff for old junk. There are many caveats and limitations to full replacement cost (if there is such a thing). Key concepts that must be understood when property valuation is discussed include: actual cash value (ACV); the broad evidence rule; and indemnification.

But what happens if the property limits are too low? Property policies contain a Coinsurance Condition requiring the insured to carry a certain minimum amount of coverage to enjoy full coverage on partial losses. If the insured does not have the requisite limits, they could be penalized.

In this session we detail:

• Key property valuation definitions such as actual cash value, replacement cost, market value, the broad evidence rule, and insurable interest;
• The various “values” assignable to property;
• Why replacement cost isn’t really replacement cost;
• The requirements created by the coinsurance condition;
• Why coinsurance exists;
• What would happen if coinsurance didn’t exist;
• The coinsurance calculation; and
• Truths about coinsurance.