One of the more common forms of insurance bad faith dealings is discounting. This occurs when your insurer tries to pressure you into accepting a settlement amount that is perceived to be far less than what you are actually owed (or what you understand you should be paid per the details of your policy). The most common complaint that we here at Tyler & Hamilton, P.A. hear from clients when it comes to dealing with insurance companies is that their lack of knowledge makes the vulnerable to abuse. Thus, understanding how insurance adjustors arrive at a settlement amount may help you determine if you are being taken advantage of.
Your settlement offer should be based off of the type of coverage you have. The terms of your policy should include details such as whether your coverage entitles you the replacement cost of covered property, or the actual cash value. Per the Insurance Information Institute, the difference between the two reimbursement models is depreciation. A replacement cost policy pays you what is needed to replace a property without deducting an amount to account for its depreciation, while an actual cash value policy does consider depreciation. Thus, a replacement policy should offer you enough to replace the property entirely.
The only exception to this may be with your home. As the costs to build a home are based off several fluctuating factors (e.g., property values, access to materials), many insurers offer either guaranteed replacement coverage (an agreement to pay whatever is needed to rebuild your home to it’s pre-damage value) or extended replacement coverage (an agreement to pay a pre-determined percentage over your coverage limit to account for fluctuating costs).
You can learn more about how insurance coverage should be determined by continuing to explore our site.