Tip of the Month October 2007-
Loss Settlement by Policy Type:
The flood policy provides three (3) methods of settling losses for the different types of policies:
- Replacement Cost,
- Special Loss Settlement,
- and Actual Cash Value.
A single family dwelling insured under the Dwelling Form offers replacement cost settlement if:
1) dwelling is the insured’s principal residence as defined, and
2) at the time of the loss the amount of insurance on the dwelling is 80% or more of the full replacement cost immediately before the loss, or is the maximum available under NFIP ($250,000)
When a Replacement Cost settlement NFIP pays to repair or replace(which ever is less) the damaged part of the dwelling after the deductible is applied and without depreciation up to the limit on the policy using materials of like kind and quality but no more than the policy limit or the replacement cost.
Special Loss Settlement applies to a single-family dwelling that is a manufactured or mobile home or a travel trailer as defined (+16’ wide and an area of 600 square feet) when dwelling is the principal residence will repair to its re-damage condition if economically feasible to repair or replace at the replacement cost of the dwelling or 1.5 times the actual cash value, whichever is less up to the limit of the policy.
Actual Cash Value loss settlement applies to a single-family dwelling not subject to replacement cost or special loss settlement which would be the secondary or rental properties or primary residences that are insured for less than 80% of the full replacement cost value. Other examples are:
- 2-4 Family Dwellings
- Non-residential (General Property Form)
- Manufactured or mobile homes or travel trailers less than 16’ wide or 600 square feet
- Detached Garages
- Personal Property
- Appliances, carpets and carpet pads
- Outdoor awnings, antennas or aerials of any type, and other outdoor equipment
- Any property covered under the policy this is abandoned after a loss and remains as debris anywhere on the described location
The Residential Condominium Building Association Policy is settled on Replacement Cost subject to the 80% Co Insurance Clause.
