Is It Illegal If I Did Not Pay Contractor Depreciation Money

Information technology always amazes usa how many homeowners and business organization holding owners who don't really take a inkling what recoverable depreciation really ways, when dealing with their property damage insurance claims.

And even stranger than that – from our unique perspective and vantage point – information technology is even more perplexing the astronomical amount of CONTRACTORS who too don't take a clue what recoverable depreciation really means when dealing with the property impairment insurance claims of their clients.

We know this because we talk to then many contractors on a daily footing. And of grade nosotros see bodily insurance estimates written by insurance companies and nosotros have the vantage point to exist able to see unique details about various projects that go on throughout the The states and Canada that we are in some way involved in.

Consider this scenario – and this is pretty typical of insurance claims that are going on right now in the U.s. and Canada:

A homeowner has a hail damage insurance claim. They phone call the insurance company to file the merits. The insurance company sends out an insurance adjuster to audit the property for property damage. They and then consequence a check and a detailed line item gauge – usually prepared with Xactimate- to the homeowner.

The next thing that happens is the homeowner contacts a number of contractors to come out and wait at their holding and give them estimates. At some point, depending on who they rent, the homeowner will share their insurance adjuster's estimate with the contractor. In the approximate it shows very clearly that the total value of this belongings damage merits is equal to the RCV, which stands for Replacement Cost Value. That's the full amount of the insurance claim.

Next you lot will see a deduction for the deductible, start and foremost. So yous will typically run across a deduction for what is called Recoverable Depreciation. Finally you will see an amount that is typically equal to an accompanying check to go with it.

Does this sound familiar to y'all? Well the problem is this, and here'due south where the misconception unremarkably comes into play:

Most homeowners when they run into the term "Recoverable Depreciation" they tend to ignore the get-go discussion of that term, which is recoverable. And the problem is that they focus on the discussion depreciation. And what comes to mind for them then is depreciated value. Most people have had an auto insurance merits where perhaps a vehicle has been "totaled out" by the insurance visitor. And so they've learned the hard way what depreciation really ways. The insurance company does not come out an issue you a check for the total value of what you paid for the vehicle or the full value of what information technology would cost to purchase a brand new vehicle of like kind at today's value. Instead what they do is they offset deduct mileage, whatever blemishes on the vehicle and annihilation else that might have depreciated the value of that vehicle before the accident actually happened. And and so they deduct a large amount from what it would really cost to buy a make new vehicle at today's rate and they cut y'all a check for the departure.

On a property harm insurance claim a homeowner will typically and incorrectly view their insurance claim like an ACV insurance policy versus an RCV policy, which is what most insurance holding damage claims actually are (especially if there is a mortgage every bit it will usually exist required). So what a homeowner unremarkably thinks when they view their insurance estimate is that the insurance company is looking at the roof and they're saying, "Well, the roof is seven years one-time, so we're going to take off $3,000 because it'due south non make new anymore and information technology's depreciated in value, and and so nosotros're not going to pay equally much."

So they remember that the particular for the recoverable depreciation is gone forever. They call back that that item has been deducted because the roof is older and they're only going to get the value of what the roof was actually worth before the hail storm occurred. And the contractor typically thinks this same affair! This is totally inaccurate information that'due south leading us in incorrect directions. It's inconceivable how then many contractors will allow this misconception to slide through. When contractors miss this, it hurts the industry as a whole and it drives prices down, beyond the board.

Merely for anyone out at that place who yet actually doesn't know the real truth of what recoverable depreciation actually means (and that'due south okay; many of us have all been there at one point), today is your day to find out. Because here is the actual truth about recoverable depreciation:

The insurance company has to pay the value of what the roof volition price at today'due south rates. They have to pay the cost of a brand new roof and non a used roof. They might deduct what they call recoverable depreciation, yes. But the truth is that they have to pay information technology once the work is actually performed; or in other words, when the merits is actually incurred.

After the project is completed, an invoice can exist submitted to the insurance visitor for the total value of the actual job, and at that time the insurance visitor has an obligation to release and pay the Recoverable Depreciation. It's amazing how many contractors we've talked to that have said, "What recoverable depreciation? Practice you hateful that there'south a mode that we can get that back? Nosotros always simply assume that that money was deducted and gone. We've been doing all of our jobs for the ACV value. You hateful that other money is withal available?"

The answer is absolutely 100% yes! That money is role of the projection. The insurance company has an obligation not to pay for the depreciated value of the roof, but they have an obligation on an RCV claim to pay the full replacement cost value (RCV) of the roof. Which means that they have to pay the cost of a brand new roof at today'southward rate.

And we believe that the first pace when taking on whatsoever new prospective client and trying to present yourself to them and trying to present the services of your visitor, you should be educating your clients. Not just about insurance claims in general but almost your company and your process and how the industry equally a whole works when information technology comes to a holding damage insurance claim. Nosotros recall that a valuable nugget of free communication to laissez passer along to your customer right abroad is to teach them the truth well-nigh recoverable appreciation. Nosotros call up that you accept an obligation as a contractor to make certain that every customer yous come into contact with knows the truth about recoverable depreciation. And why is that? Consider the post-obit:

There are only a few insurance companies that volition actually go dorsum and notify the homeowner later that the recoverable depreciation has never been claimed, and that the money is literally all the same sitting there on the table waiting for them to collect.

And then with that in mind, how much coin in total practice insurance companies keep on a yearly basis in unclaimed recoverable depreciation, that in fact was owed to property owners for work that was performed on their properties?! We submit to you that the number is in the hundreds of millions – if not billions with a B.

How is that right to do?

We believe that contractors take an immense obligation in their current roles to help do something about that.

Going beyond that, when the final invoice is presented to the insurance company to collect the amount of recoverable depreciation that is old, keep in listen that if the amount of work performed was actually greater than – and more extensive than – the adjuster'south estimate that was written, the insurance company might just have an obligation to also pay for whatsoever increasing expenses. The best chance for getting the insurance visitor to pay more than what was previously offered (this because of additional work needed in order to complete the prescribed project), is to start by presenting a detailed, line-itemed, Xactimate guess, written with solid experience, knowledge and understanding of how insurance claims are processed in general.

And for more on how to do that, you quite merely demand to speak to us. Showtime by visiting us at www.OverheadAndProfit.com.

End leaving money on the tabular array! We tin can help yous win in this complex game.

Hope you're having an awesome twenty-four hour period!

Experience free to leave us your comments below.

Source: https://www.overheadandprofit.com/the-issue-of-recoverable-depreciation/

Posted by: pardonound1973.blogspot.com

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