if something was to happen to my home or outbuilding/garage, will my home owners insurance pay for what my policy reads even if the dwelling or garage isn’t worth the policy value? For example, my detached garage is not in the same condition it once was, it is looking pretty worn out. If my garage is covered for ,000 replacement value and something happens to it, will my insurance cover it for what the policy reads? Or should I have them come out and reassess the value of it so I can save some money on my premium?
If your house is totally destroyed by a covered loss – your insurance pays the amount that it costs to rebuild your house with the same finishes etc as it currently has up to the policy limit. What they pay has nothing to do with market value.
Read the whole policy.
The LIMIT of coverage on the garage, is 10% of the dwelling coverage. That means the MOST they pay for the garage, is $10,000 (if that’s the limit).
Assuming you have REPLACEMENT cost coverage on the building, if/when the loss happens, like it catches on fire, they will calculate several things:
1. The insurance to value. Did you have ENOUGH coverage, to pay for the cost to rebuild your garage? If not, then they figure out how much of your garage you insured. They pay THAT percentage of the claim.
2. The cost to repair the damage. Most losses are partial losses. They pay the lesser of the cost to rebuild, or the cost to repair, or the policy limit.
3. The depreciated value of the garage. That means, cost to rebuild, less depreciation for age/wear % tear. That means, if the roof catches on fire, but it was 20 years old, they’ll depreciate MOST of the value of the roof.
The initial payment is for the DEPRECIATED cost to rebuild/repair – which they will then apply the coinsurance penalty (from #1, if applicable). Then they take the deductible off that.
If/when you rebuild or repair the garage, you then get the REST of the money – the depreciation amount – up to the policy limit.
You should DEFINATELY have the agent come out and recalculate the cost to rebuild your house.
Keep in mind, though, that it’s going to be cost to REBUILD, not "market value". And even though the ‘market value’ of most areas has fallen, the cost to rebuild/repair has actually INCREASED – so you could be looking at a larger number, rather than a smaller number. Still, it beats paying a slightly larger amount up front now, than being significantly shortchanged come claims time, because you were uninsured.