After Superstorm Sandy, an agent hears about some insurers telling New Jersey customers that failure to repair their homes within 180 days of the loss would mean they lose access to replacement costs.

Q: "Is this true in the ISO HO-3?"

A: “The ISO HO policies’ 180-day requirement for replacement cost coverage is often misunderstood because folks don’t take the time to actually read what it says. From a Big ‘I’ Virtual University article, this is what the 1991 ISO HO-3 says (emphasis ours):

We will pay no more than the actual cash value of the damage until actual repair or replacement is complete. Once actual repair or replacement is complete, we will settle the loss according to the provisions of b.(1) and b.(2) above.

(5) You may disregard the replacement cost loss settlement provisions and make claim under this policy for loss or damage to buildings on an actual cash value basis. You may then make claim within 180 days after loss for any additional liability according to the provisions of this Condition 3. Loss Settlement.

It doesn’t say you have to replace the property within 180 days—just that you make a claim for replacement cost coverage after you receive an initial ACV-based payment.

In its 2000 edition HO-3, ISO clarified the second paragraph above (emphasis ours):

You may disregard the replacement cost loss settlement provisions and make claim under this policy for loss to buildings on an actual cash value basis. You may then make claim for any additional liability according to the provisions of this Condition C. Loss Settlement, provided you notify us of your intent to do so within 180 days after the date of loss.

The moral of this story? Read the policy thoroughly.

Bill Wilson is director of the Big “I” Virtual University.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.