Condo Media - February 2019 - 40
T
NAVIGATING REPLACEMENT COST
The simple definition of the term
"replacement cost" coverage is
the cost to replace the damaged
property with materials of like kind
and quality without any deduction for depreciation. While most
modern master insurance policies
readily available in the marketplace
provide replacement cost coverage,
some insurers can further enhance
this coverage with endorsements
such as "extended replacement
cost" coverage or "guaranteed replacement cost" coverage.
COVERAGE AND
ENDORSEMENTS
The best way to explain the difference in the three terms-replacement cost coverage, extended
40
CONDOMEDIA February 2019
replacement cost coverage, and
guaranteed replacement cost coverage-is to use a hypothetical example
of "Pretty Glen Association"with a full
replacement value of $10,000,000.
If Pretty Glen Association purchased an insurance policy that only
provided replacement cost coverage
with no enhancing endorsements,
the amount of property coverage
available for a total loss to the entire
community is $10,000,000. No More.
A policy with extended replacement
cost coverage provides an additional
amount of coverage-usually 25 percent
more-in the event of a total loss.
In our example above, if Pretty Glen
Association purchased an insurance
policy that provided extended replacement cost coverage, the amount of
property coverage available for a total
loss would be $12.5 million. The extra
$2.5 million above the base of $10 million is available because of the extended
replacement cost coverage.
Now if Pretty Glen Association purchased an insurance policy that provided true guaranteed replacement
cost coverage, there would be NO CAP
on the amount of property coverage
available for a total loss.
Keep in mind that not all insurance companies are able to offer the
property coverage enhancements
described above. It goes without saying
that a true guaranteed replacement
cost policy is the way to get the most
protection for a total loss. When considering different policy options, the
nature of your community determines
Condo Media - February 2019
Table of Contents for the Digital Edition of Condo Media - February 2019
Contents
Condo Media - February 2019 - Intro
Condo Media - February 2019 - Cover1
Condo Media - February 2019 - Cover2
Condo Media - February 2019 - Contents
Condo Media - February 2019 - 2
Condo Media - February 2019 - 3
Condo Media - February 2019 - 4
Condo Media - February 2019 - 5
Condo Media - February 2019 - 6
Condo Media - February 2019 - 7
Condo Media - February 2019 - 8
Condo Media - February 2019 - 9
Condo Media - February 2019 - 10
Condo Media - February 2019 - 11
Condo Media - February 2019 - 12
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Condo Media - February 2019 - 15
Condo Media - February 2019 - 16
Condo Media - February 2019 - 17
Condo Media - February 2019 - 18
Condo Media - February 2019 - 19
Condo Media - February 2019 - 20
Condo Media - February 2019 - 21
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Condo Media - February 2019 - 40
Condo Media - February 2019 - 41
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Condo Media - February 2019 - Cover3
Condo Media - February 2019 - Cover4
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