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.