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Hi.  The whole concept of insurance is based on the theory of indemnity.  In layman’s terms that means, that you pay an insurance company to transfer your risk to them, so that in the event of a claim, they will put you back into the position you were in prior to the claim. On the surface that is a simple concept; however, it gets complicated practically where the rubber meets the road.

I will give you an example.  Say for instance you owned a building that was used as a warehouse.  The building was an older building constructed fifty/sixty/seventy five years ago built out of poured concrete.  At the time of the loss (i.e. you have a fire loss or some other catastrophe of that nature); it may be not economical to rebuild a structure using poured concrete.

However, because the usage is a warehouse, you may be fine with the insurance company paying for a General Contractor to build a building out of cinder block or some other form of modern construction.  Alternatively, as we just had in the news, with the terrible fire at Notre Dame, cinder block construction is not going to cut it.

You need to have an agent who understands not only different types of insurance, but your exposure; what you are dealing with; accurate Replacement Cost Estimation – and also applying the appropriate Terms and Conditions to your policy.  So that in the event you do have a terrible loss, you CAN be put back in the position you were in beforehand.

Sometimes you do not want to insure yourself to one thousand year old type of construction, because the cost may be to much.  You may want to opt for Functional Replacement Cost or another variation. Again, it is key that you have a qualified Insurance Professional looking out for your interests, examining your exposures and providing you with a proposal that addresses your needs.

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