What is Functional Replacement Cost?
How Can Functional Replacement Cost Lower Property Premiums?
Generally speaking, the intent of property insurance is to make you whole after a loss. However, in some unique circumstances, the expectations of being whole can vary rather significantly so there are different policy features to meet different needs.
When Does Functional Replacement Cost Offer a Solution?
Many buildings, whether occupied by businesses or families, are very old. These buildings were likely constructed using techniques and materials that are extremely difficult if not impossible to find in modern construction. While the history and uniqueness is certainly part of the allure of many of these buildings, it adds to the cost and complexity of insuring the property at its full and proper replacement cost. Functional Replacement Cost can be used as a solution in these situations by insuring and, in the event of a loss, rebuilding the property using modern constructions techniques and materials. This will result in the property being fully repaired, however the cost of labor and materials will be substantially less lowering the amount of coverage needed and the premium you pay for the property insurance.
Is Functional Replacement Cost Right for Me?
Whether or not Functional Replacement Costs is the best option for you is really a personal decision. If you would like to pay more to have the increased coverage necessary to pay the additional charges on the rarely available techniques and materials to get your old building back as closely as possible to its pre-loss condition then Replacement Cost is still your best option. However, if repairing your building as closely as possibly to its pre-loss condition using modern construction techniques and materials is completely acceptable to you, Functional Replacement Cost will provide you with this coverage along with potentially substantial savings on your property insurance.