What is 100% replacement cost anyway?
I get asked this question every day it seems. Mostly by a mortgage lender that needs to check off a box on an application.
What does it mean?
Most policies have a replacement cost provision. Replacement cost means that the insurer will replace without applying depreciation. Simple.
So why ask for 100% replacement cost? What is it?
Problem is nobody really knows till you replace it. It is a educated guess or it comes from a table with a calculator.
Why would someone say that yes it is 100% replacement cost? How do they know? Who died and made them the expert? Just because they used a construction estimator, or they exceeded the companies suggested insurance to value guideline, does not make them right.
So we make a valued decision. But for some property manager or insurance professional to check off yes this is 100% replacement cost is tantamount to a guarantee.
Unless you have a guaranteed replacement clause on the condominium policy, the 100% limit is someone’s (hopefully) best judgement. I guess we will not know for sure till the property is replaced.