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Why Your Insurance Claim May Not Pay As Much As You Expected

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Alex Dopazo

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If you receive a claim from your insurance company and it’s less than you expected, you may wonder why you paid for your replacement coverage. Read below for the two likely reasons your insurance claim didn’t pay as much as you expected: 

Understanding Property Insurance

To better understand why you didn’t get paid for the cost to replace even though you paid for the coverage, you must learn one of the most fundamental concepts of property insurance:

Property insurance is only meant to make you whole.

This means that property insurance is not meant to make you better or leave you with more than what you had, but rather get you back to where you were before the loss occurred. Your insurance policy contract is written in a way to accomplish exactly that. 

Scenario 1: You’re Going to Replace the Property You’ve Lost

If you intend to replace an item, it’s unlikely that the exact value of it can be determined. Instead, the insurance company will give you the actual cash value, or the amount you originally paid, minus depreciation. 

When you’ve purchased a replacement, you can present your receipt to the insurance company to be reimbursed for the difference between the actual cash value they gave you and what you paid for the replacement. Keep in mind that you must have replacement cost coverage on your policy for this to happen.

This is how the insurance company determines that you’re getting back to the position you were in before the loss occurred. 

Scenario 2: You’re Not Going to Equally Replace the Property You’ve Lost

If you’ve decided to either not replace the item or replace it with a less-expensive alternative, this is where insurance companies will usually only provide the actual cash value, or the amount you originally paid, minus depreciation. 

In this scenario, the insurance company will not offer the amount to replace your original property, but rather how much it would cost to replace it with a less-expensive option. For example, say you bought too much tile when you re-did your floors, and you were unable to return the extra. If you experienced a fire and the tile was damaged, you would only be given the actual cash value of the tile that you weren’t going to replace. 

The policy is built to make you whole, not better. If you’ve lost something you have no use for, you will only be given the actual cash value for that item. 

In Conclusion

If you bought a replacement for the property you’ve lost, you can submit a receipt to cover the difference between what the insurance claim gave you and what the item actually cost. 

If you choose not to replace the property, you’ll still get the actual cash value, which you can use however that you want. 

It’s important to remember that insurance is not created equal. You’ll need to look at your policy for it’s exact terms and definitions. 

Talk with a trusted insurance advisor if you have any concerns. If you don’t have one, feel free to reach out to us at You can chat with us, give us a call, or fill out a form to get in contact with us. It’s our pleasure to answer your insurance questions. 

About Blog Author


Alex Dopazo

In 1998, Alex Dopazo, joined his father at the agency and fell in love with insurance. It sounds corny, yes, but we love insurance and how it can help our customers. Together we share that love with all of our customers who eventually become friends.

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