Copyright Brine Development Services, LLC 2012
Office: (813) Office: (813) 699-
Brine
Development Services, llc
Replacement Cost Valuations (RCV)
Many insurance valuations used to determine insurable replacement cost rely heavily on the most recent market value sale, even if that sale was several years ago.
Well, let’s face it, most of us now realize that home prices several years ago were predominantly inflated. As for the land, they are not going to replace the land.
Insurance replacement cost valuations (RCV) are different that appraisals. RCVs do not consider the value of the land upon which a structure is built and, therefore, do not in any way reflect the current market value of the property.
RCVs establish the actual cost to completely replace your home, including demolition
costs, in the event it is destroyed due to an insurable event. This valuation provides
an independent analysis of your home’s current condition and its true estimated reconstruction
cost in order to assist you and your insurance agent in determining adequate insurance
coverage so that you are satisfied that you are neither over-
Many suggest that the excessive replacement cost valuations that insurers force upon us are actually a backdoor method increasing our insurance premiums. Apparently, the Florida Legislature agreed.
On April 30, 2012, the Florida Legislature passed H.B. 1101, in part, to provide legal protection for Florida homeowners from unreasonable RCVs determined by insurers. The key provisions regarding RCV are as follows:
Replacement Cost Valuation
History
Section 627.7011(1), F.S., requires property insurers to offer homeowners a homeowner’s insurance policy providing dwelling losses will be adjusted on the basis of replacement costs, rather than actual cash value. Section 627.7011(3), F.S., prescribes how insurers pay losses on policies insured on the basis of replacement costs.
Recently, the method Citizens uses to estimate replacement costs has been questioned
by homeowners. In November 2011, Citizens implemented a policy accepting only replacement
costs generated by 360 Value, property valuation software that provides component-
In response to concerns raised by homeowners, in January 2012, Citizens reviewed its policy regarding how replacement costs were to be calculated and implemented a new policy accepting a myriad of valuation methods. According to the new policy, Citizens will consider the following reconstruction based options to determine replacement cost valuation:
1) Replacement (reconstruction) cost estimates generated by 360 Value, Marshall & Swift/Boeckh (MSB), or e2Value;
2) An insurance reconstruction cost valuation prepared by a licensed appraiser which is specifically formulated to establish the insurance reconstructions costs, rather than market value;
3) Reconstruction cost estimates prepared by licensed general contractors, architects, or engineers which include a contract price for reconstruction cost and an itemized list of the home’s features; and
4) A Property Inspection Report dated within the past 12 months ordered by another property insurance company that includes a detailed reconstruction cost estimate.
[Apparently, the Legislature felt the need for a legal requirement, not just a policy that could be changed and interpreted at Citizens discretion and included the following provisions in the Bill.]
The bill requires Citizens to accept the following methods of replacement cost valuations and requires Citizens to accept the lowest valuation as long as that valuation was done within the 12 months prior to the application for new coverage or coverage renewal date, and was:
1) A replacement cost valuation generated by a valuation software program designed to establish insurance replacement costs and which includes an itemized calculation of the costs;
2) A replacement cost valuation prepared by a licensed real estate appraiser which includes an itemized calculation of the costs;
Or
3) A replacement cost valuation prepared by a licensed contractor or engineer which includes an itemized calculation of the costs.
Office: (813) Office: (813) 699-