What determines a home as a total loss

UPDATED: Jan 20, 2016

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UPDATED: Jan 20, 2016Fact Checked

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Asked January 20, 2016

1 Answer

A home is determined as a total loss when the cost to rebuild the parts of the home that were damaged is higher than the actual value of the home. The insurance company has provisions to pay for repairs for your home, but their formulas tell them how much the repairs will cost. There comes a point at which the cost of the repairs and replacements that it is better to declare the property a total loss. Starting over may be a terrible decisions to make, but this article explains how large the loss must be.

  1. The Home Repairs Could Be Astronomical
    The repairs to your home could be exponentially greater than the price assigned to rebuild your home. Your insurance company has assigned a value used to rebuild your home, and repairs that reach this number will cause the carrier to note a total loss. The rebuilding costs are only part of the issue when dealing with damage, and your insurance company will take personal property into account.
  2. Personal Property Coverage
    There is coverage in your policy that pays to replace personal items. Each person item will add up to a total, and the total could push the price too high for your insurance company. Paying for personal property replacement and repairs together may be more expensive than paying out the rebuilding costs and personal property value. You will receive a check for both, but that value is less than attempting to spend months repairing the house while replacing your property.
  3. How Long Does This Process Take?
    The adjuster for your home will take a few days to determine how much it will cost to repair your home, and the adjuster works with their superiors to determine whether your home should be declared a total loss. You will be informed as soon as the insurance company has reached a decision, and you will receive a check in the mail for either the total loss or the repairs.

You must contact your insurance carrier the moment damage occurs inside your home, but you must allow the carrier time to determine how extensive the damage is. There is a formula that will determine how much it will cost to repair your home, and those costs may far exceed the replacement costs in your policy. Your carrier will declare your home a total loss in this case, and you may rebuild from the ground up.

Answered January 21, 2016 by InsuranceStar

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