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UNDERSTANDING PROPERTY INSURANCE CLAIM WORK

UNDERSTANDING PROPERTY INSURANCE CLAIM WORK BSC handles all types of storm damage claims, including hail, wind and water damage.

Insurance work often times requires more than just a competent field contractor. Your insurance company has a goal to cure your damages with a solution that will cost them the least amount of damage to their bottom line that you are willing to accept per your policy agreement. Our goal at Big Sky Contractors is to see that your home looks as good or better than when the damage occurred. This often times requires that the home owner & BSC work as a team to submit a detailed damage repair report and scope that equitably outlines truly what it will take to repair damages to policy replacement cost value, which by definition means to replace to new condition.

  • Insurance Interest Is To Save Money On Cost To Repair
  • BSC Interest Is To Get Full Coverage To Repair
  • Call Us Today At 406-879-9838

INSURANCE TERMS YOU NEED TO KNOW AND UNDERSTAND:

RCV - REPLACEMENT COST VALUE

The real true and accurate (RTA) cost to replace an insured/covered item with a new value item. Used or refurbished items are not appropriate under this category of replacement.

ACV - ACTUAL CASH VALUE

What an item is worth today, or it's depreciated value. For example, if I purchase a new work truck for $40,000 and it depreciates $5,000 after I drive it off the lot, It's ACV value when I get home is $35,000.

DEPRECIATION

The value associated with how a particular item loses financial worth over time. In the example above the depreciation related to the truck immediately after the purchase was $5,000. Most home items such as roofs and gutters depreciate a small percentage/year after new installation, where the depreciation is calculated over the MFG stated life of the product. For example, if you have a 40-year roof installed it would be depreciated @ 2.5% per year (100%/40 = 2.5%)

CALCULATION

"TOTAL LIFE %" / NUMBER OF YEARS OF EXPECTED LIFE = % DEPRECIATION/YEAR

RECOVERABLE DEPRECIATION

Most homeowner policies are whats called RCV or Replacement Cost Policies, meaning insurance agrees to pay the full replacement cost (ACV + Depreciation) to restore the homeowners dwelling back to new pre-storm condition. Typically ACV is paid up front after first insurance overseen inspection of damages in a "1st Check". The depreciation is then paid or released by the insurance company once a final invoice is submitted by your General Contractor affirming work is scheduled and under contract or completed.

DEDUCTIBLE

The amount of out of pocket you have agreed is "your skin in the game" for the payment of repairs or restoration. For example, if you have a $2,000 deductible as approved and documented in your insurance contract, then budget to pay the first $2,000 towards insurance covered repairs on your home. Your insurance provider will pay any other costs associated with bringing your home back to pre-storm condition.

REAL WORLD DEDUCTIBLE EXAMPLE

Insurance sends a field adjuster to your home to evaluate or scope the hail damage after a specific storm that has damaged your entire roof, gutters, dented your garage doors, and pitted the front and right exterior siding of the house. The adjuster writes the official insurance estimate, outlining what they intend to cover and for how much, which includes full roof and gutter replacement, however you are told the siding is not hailed damage but normal wear and tear and there is no mention of any damage to the garage door in her estimate. The RCV value of the roof is $14,000 & the gutter replacement is valued at $1500. The ACV is calculated to be at 30% depreciation so the initial insurance payment to you is ($15,500 x .7) $10,850. Your deductible is $2,000, so the actual check you receive in the mail with a breakdown of the items and trades covered is ($10,850 - $2,000) $8,850. There is ($15,500 x .3) $4650 in recoverable depreciation being held by your insurance carrier until the work is under contract or completed. You hire a General Contractor to oversee and manage the work to be done on your home. Your contractor explains how your siding does have hail damage and describes why including showing you collateral damage from the storm that supports the right scope of damage. Washable chalk is used to display dents from hail in the garage doors, and local estimates with appropriate documentation are forwarded to you or directly from your contractor for an insurance review. Insurance concedes that the new scope is supported with the provided detail, and agrees to pay for new garage doors ($2300) and new siding for the front and right side of the house ($18,000). The additional $20,300 is paid in full by insurance as the customer out of pocket deductible was already accounted for and satisfied with the original $8,850 insurance payment.

In this example, the total RCV for the roof ($14,000), gutters ($1,500), Garage Doors ($2300) & Siding ($18,000) = $35,800. The homeowner has paid $2,000 towards this total and collected $33,800 from insurance which includes both the ACV and the depreciated amount.

WINDOW TO RECOVER DEPRECIATION

The window of time from either the storm date or from the time insurance P&C was notified of a loss to have the work performed and invoiced for the recovery of depreciation.

O&P - GENERAL CONTRACTOR OVERHEAD AND PROFIT

Profit is designed for additional profit that can be invested back into the company. overhead accounts for your GC organizing, overseeing & paying the project sub-contractors. this fee also covers insurances and the liability your gc carries for running the project and managing the liability for quality of work.