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Repair Cost or Actual Cash Value

Summary: For many insureds the Insurance Services Office (ISO) HO 00 08 10 00 provides the best alternative to purchasing a replacement cost policy. Those insureds with ornate homes built earlier in the century, or those with replacement values far exceeding market value, may be provided less costly insurance with this policy.

This discussion looks at changes made in the 2000 edition of form HO 00 08, noting differences from the 1991 edition. Although this is a new edition, most of the changes made are identical with those of the other homeowners forms. For this reason, only those changes specific to the HO 00 08 are included.

Topics covered:

Introduction Loss settlement conditionsActual cash value vs. repair cost settlement

Theft coverage restrictions

Other coverage restrictions

Perils insured against


Other coverage options


Form HO 00 08 deletes the replacement cost provision of the other homeowners forms and substitutes repair cost, or, where required by law in some states, actual cash value. In order to benefit from the replacement cost condition, an insured must buy enough coverage to represent at least 80 percent of the cost of replacing the insured structure. For most insureds, this requirement only poses the problem of increasing the amount of coverage to keep pace with inflation. However, for a large segment of insureds, the replacement cost clause presents another dilemma: the substantial and often ornately detailed homes put up before the 1950s often have a “replacement cost” far in excess of what the owner might spend to replace the dwelling using modern materials and simpler construction techniques.

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