Insurance is intended to cover many potential losses that you would not normally expect to pay for, including incidents that are sudden and accidental. However, there are certain items that will eventually have to be replaced anyway, due to normal wear and tear. As such, your insurance might not cover full replacement of these items. Let's take a look at a few items to which this may apply.
Your Roof
The life expectancy of a roof can vary, depending on the roof type. Eventually a roof will need to be replaced due to sheer age; this, of course, is not covered by insurance. However, if you have coverage in case of certain events, such as a fire or a windstorm that damages the roof, these incidents are likely to be a covered loss under your homeowners' policy. Most policies now apply depreciation on your roof. Let's say you have a 40-year roof and it's 20 years into its life. The replacement cost of the roof is ten thousand dollars. Since your roof has already gone through half of its useful life, the policy may only pay you five thousand dollars in this case. While the homeowners' policy may have a replacement cost clause, there are exceptions regarding certain items such as a roof, because this is something that will eventually need to be replaced and paid for by the homeowner anyway. Although some policies may include full replacement of the roof; chances are, you will have to pay up for such a policy. This should be a discussion point when you are reviewing your homeowners' coverage with your agent.
Your Fence
Just like your roof, a fence also has a useful life span and will eventually need to be replaced. The big issue with fences is that over time, they weaken; older fences are more vulnerable to being blown down by a windstorm. Most policies do look at the useful life of the fence and depreciate its value, since it will eventually have to be replaced and paid for by the owner. In addition, a fence may be shared with a neighbor. If this is the case, your neighbor may have 50% responsibility for this fence, so insurance usually takes this into consideration and compensates you 50%; the neighbor's insurance company should also compensate them 50%. With both companies providing 50% coverage, this equals 100% coverage minus the depreciated value of the fence, if that applies. Many companies came out with the depreciation clause because some homeowners chose to wait for a windstorm in order to replace their fences with full coverage.
Such a scenario would raise everyone's insurance premiums-just to pay for a fence. Insurance costs are kept at a minimum by preventing people from constantly filing wear and tear claims. Moreover, if insurance companies did fully cover wear and tear, people might not maintain their properties. Many would simply wait for a covered incident to occur. This would raise the cost of claims and would allow a few to be irresponsible with their maintenance responsibilities at the expense of others.
Car Tires
If your tire gets damaged in an accident, this is probably a covered claim-subject to the remaining life of the tire. Just like the roof and fence examples, a tire is something you would have to eventually replace anyway. Your insurance company is not saying they won't cover it - they are saying they will cover the tire minus depreciation. Yes, you may have to prematurely replace the tire and you will likely get partial coverage for this, but at least you won't have to pay 100% of the coverage as you would when the tire needed to be replaced anyway.
These are just a few examples of what may be depreciated. However, if you have a replacement cost policy, then most of your property will be covered at the replacement cost. If you don't have a replacement cost policy, then depreciation applies to all property for which you have coverage. A claims adjuster will review your policy to see if coverage applies. Declining a claim or only providing partial coverage is not a pleasant thing to do, but insurance companies must go by the policy contract and protect all their policyholders from increased costs and preventable claims. All policyholders should not have to pay extra premiums just because some choose to wait for a covered insurance incident before replacing what they should have replaced all along.
If you have questions or concerns on this issue, do not hesitate to call Zeiler Insurance and speak to one of our customer service representatives. As an independent agency, Zeiler Insurance prides itself with quality customer service for the people of the Chicago-land area and the rest of the Midwest. Customer or not, we can review your insurance and see if you are being protected appropriately for the right price.
Dan
dan@zeiler.com
708.597.5900 x134