There was a time when the term replacement cost coverage for your home and its contents meant exactly that in Idaho. Consumers who bought replacement cost insurance were fully covered if their home or its contents were totally destroyed. That is often no longer the case for insurance policies sold in the Gem State.
Many companies sell homeowners insurance in Idaho identified as replacement cost coverage on the front declarations page, but the fine print located elsewhere in your policies reveals a deceptive reality. This became evident to me when Pocatello experienced the Charlotte Fire that burned 66 local homes.
I assisted six people with insurance claims because of that fire and discovered the policies all had alternative definitions for replacement cost coverage; formulas were often applied, and the stated amount of coverage sold for the residence became critical in determining if you would receive the monies needed to rebuild your home.
Those calculations were often complicated and were not something most consumers understood until it was too late. Your being paid the actual replacement cost potentially depended upon the amount of coverage you were initially sold for the structure, a sum primarily determined by the insurance companies.
For example, a more recent fire claim I evaluated involved an insured who had an endorsement for replacement coverage on their declaration page for their house. It was destroyed, and the cost to replace the house was $250,000, while the value listed in the policy for the structure was $160,000. The “replacement formula” contained elsewhere in the policy circled around to limit the maximum the insured could recover to $160,000 if they rebuilt the house. How is that replacement cost coverage?
This borders upon insurance fraud and is a deceptive practice that should be prohibited in Idaho. These formulas should be explained in advance by the insurance companies in clear language to assist homeowners in setting proper values for obtaining actual replacement cost coverage. However, I haven’t encountered a single instance where insureds were properly advised of this coverage issue when the insurance was purchased.
Agents rarely explain the potential gap to their insureds, and the insurance policies do not contain language warning insureds full replacement cost coverage may not actually exist although the declaration page lists it as an endorsement.
Other types of misleading insurance coverage are sold in Idaho. Virtually all Idaho underinsured coverage provided in auto policies has no possibility of being recovered if you are sold the minimum liability limit of $25,000. Your policy will state you have this coverage, but the offset language eliminates the benefit leaving you with illusory coverage.
State Farm (not my insurance carrier) is the only company I know of in Idaho that actually provides the amount of underinsured coverage it sells you in addition to the opposing driver’s liability limit. I applaud the company for having an honest policy in this regard because it significantly increases your coverage for damages sustained in auto accidents which is what the average person would expect.
The process where insurance companies represent one type of coverage on the declaration page, only to take it away by fine print elsewhere, is also a form of bait and switch, and the Idaho Legislature needs to protect consumers from these practices.
Idaho has historically been laissez-faire in its regulation of insurance companies and most consumers have misleading language in their insurance policies.
Legislators should examine these issues closely in order to enact legislation protecting consumers from deceptive insurance practices.
In the interim, discussing your policy with your agent is advisable to determine if you actually have sufficient coverage to replace your property in the event your home and its contents are destroyed.
The wording in insurance policies varies substantially, and the emotional devastation of losing your home will be compounded if you subsequently discover the replacement coverage you thought you bought “ain’t” what it says.
Jesse Robison is a Pocatello native educated in Idaho. He works as a mediator and insurance claim consultant, but his passion is public art. Robison has spearheaded art improvements throughout Pocatello, including the Kizuna Garden located at the Pocatello airport, and serves on the Bistline Foundation.