Reinstatement Or Replacement Conditions
Many insurance policies cover the replacement value of property which has been destroyed and the reinstatement value of property which has been damaged. The replacement or reinstatement (R&R) value must not exceed the "as new" replacement value. This is where the term "New for Old" originates.
To receive the full value the Insured must satisfy five R&R provisions: -
- The replacement or reinstatement must be carried out with reasonable dispatch.
If this provision is not satisfied the basis of settlement reverts to indemnity value. This is a value that reflects the age and condition of the damaged property. It is less than the "as new" replacement value. It may be a second hand value.
- The time frame that reflects "reasonable dispatch" will vary depending upon the circumstances and complexity of each claim.
It is rare for the R&R conditions not to apply because the work is not performed with "reasonable dispatch".
- Where property is repaired the repair value cannot exceed the replacement value.
This clause also rarely creates any problems in claim settlement.
- If the total replacement value of all property at the commencement of the period of insurance is less than 85% of the actual replacement value an underinsurance penalty may apply.
This provision often prevents a Policyholder from receiving the full R&R value.
- The R&R cost must be incurred before the claim can be paid.
If the insured spends less than the R&R value they receive the amount spent. This provision may prevent payment of the full replacement value. However, this may not create a problem as the Policyholder is usually satisfied the replaced property is an equivalent substitute for the destroyed property.
- All other property cover must be insured on a similar R&R basis.
As with provision (a) this provision rarely restricts the value of the settlement.
Make sure you replace or reinstate!
Author
Published with permission of Claim Solutions Pty Ltd.
Insurance Policy
Country: - Australia
Policy Description: - Mark IV Industrial Special Risks (ISR) Policy
Insurer: - Various
External Links
|
