On Jul. 3, MCH INS issued bulletin on non-tangible item depreciation.
MCH INS issued Bulletin 2024-18-INS in regard to depreciation of non-tangible items.
Prohibits insurers from depreciating labor costs when paying a homeowners claim.
Unless the insured has agreed in advance to reduction in exchange for lower premium.
Actual Cash Value Coverage
Actual Cash Value (ACV) coverage means an insurance company will pay for property damage based on the current cost to repair or replace it, minus any wear and tear.
Some insurance policies depreciate labor and other intangible items; this line item can lead to homeowners receiving less money to repair or replace their property.
Bulletin 2024-18-INS
The new bulletin clarifies that labor to repair covered damage is not a physical object that can depreciate; consumers may be misled by policies that include labor in ACV.
Beginning in Jan. 2025, carriers cannot include this language in their standard policy.
However, it may be permitted for consumers to include an optional endorsement allowing for depreciated labor in exchange for paying a lower premium.
For policies issued or renewed effective Jan. 1, 2025, or after, insurers that wish to depreciate labor or other non-tangible items must do so by a standalone endorsement.
Such endorsements must be optional coverage available for a reduced premium.
MCH INS will not approve policies that include language that depreciates non-tangible items in the policy definition of Actual Cash Value, Depreciation, etc.
