This episode is brought to you by the financial services school.
Specialising in educating insurance professionals.
Many policies covering home or business buildingsand contents are insured on a new for old basis.
This is known in the insurance industry asreinstatement and replacement.
This means that the insurer will repair orreplace the asset to a condition as new.
In other words,if your home was 50 years oldand burnt down, the insurer would rebuild your home to the same size and use the samematerials as before.
With no deduction for depreciation or the fact that some partsof the building and its contents may have been near the end of their useful lives.
But what if building regulations have changedin your area? Now instead of the single glaze windows youonce had… you must install double glazed windows as well as achieve a 5 star energyrated home just to name a few? Now this list can be quite long.
And for a businesses you will likely needto add disabled toilets and access,as well as fire protection and the like.
This is where Extra Cost of Reinstatementcomes in.
This is an additional benefit that pays, typicallyup to a set amount specified in the policy or on the policy schedule for this extra costassociated to bring the building, machinery, plant and other contents up to current codes.
The older your building the more importantthis cover is and the higher the limit you will need.
For more information on this, read your policyor contact your insurance professional.