In Florida, except under certain circumstances, in an “actual cash value” policy, the carrier withholds depreciation through the indemnification process. For an additional premium amount, policyholders can purchase “replacement cost value” coverage which requires insurance companies to replace the damaged property with the full value of replacement. For example, a television valued at $1,000 is damaged in a windstorm; the life of the television is 10 years, so a five year old television is valued at $500. If the policyholder purchased “replacement cost value” coverage, she would be entitled to $1,000 to purchase a new television, compared to $500 under an “actual cash value” policy.

Often, insurance companies mistakenly pay the initial $500 under a “replacement cost value” policy and stipulate the additional $500 will be proffered upon the policyholder showing an invoice for a new television that cost at least $1,000. Florida Statute § 627.7011 does not permit this practice.

(3)(b) In the event of a loss for which a dwelling or personal property is insured on the bases of replacement costs, the insurer shall pay the replacement cost without reservation or holdback of any depreciation in value, whether or not the insured replaces or repairs the dwelling or property.

Instead of paying the depreciated value first, and subsequently paying the full replacement value later, this statute requires the insurance company to send the entire value to the policyholder initially for damaged personal property.

Florida policyholders should consider the value in purchasing “replacement cost value” coverage when purchasing their homeowners policy and understand the insurer’s responsibility under Florida Statute § 627.7011(3)(b) to pay the replacement value initially.

  • William S Cook

    Your statement appears to conflict with the modifications to the statute signed by Gov Scott in May 2011. Can you clarify the issues for this adjuster?
    W S Cook

  • Mike Pelton

    In the event of conflict between the statute and the policy with respect to the practive of holding back the difference between ACV an RCV, which prevails?

  • Also, they should not insure the land value of the property which all county appraisers list.

  • John K McDougall

    The duty of the insurance company is to indemnify and this would make the insured better off, and would create a moral problem. What is really wrong is how the depreciation is applied. Just because a TV is five years old, does not mean it is worth only half of its replacement cost. Betterment should be based on its physical condition (wear and tear). Straight-line depreciation is a tax accounting method for capitalization of assets and has absolutely nothing to do with betterment.

  • Larry Bache

    Mr. Cook, thank you for following our blog. You raise a very interesting point that I am going to be addressing in my next post. This week’s blog specifically addresses only personal property. Even after the recent Amendment, carriers are not permitted to holdback any proceeds for damages associated with personal property. On the other hand, the Amendment does directly affect how carriers are permitted to pay claims under “replacement cost value” coverage pertaining to damages to the dwelling. Next week, I will explain those changes. Thanks again.

  • Larry Bache


    I understand where you are coming from, but it is important to remember that the carrier chooses to offer replacement cost coverage at an additional premium. Thus, the true moral problem lies with the carrier not honoring its end of the bargained for replacement cost coverage.

  • Michelle

    When you send in receipts from personal loss and you have a balance left in estimated remaining replacement cost benefits do you get that amount or does the insurance company keep it?