© 2024 MICHIGAN PUBLIC
91.7 Ann Arbor/Detroit 104.1 Grand Rapids 91.3 Port Huron 89.7 Lansing 91.1 Flint
Play Live Radio
Next Up:
0:00
0:00
0:00 0:00
Available On Air Stations

Insurance companies must get consent to depreciate value of labor in homeowners' policies next year

A house with extensive fire damage
Andrea Miller
/
Adobe Stock
A house with extensive fire damage

Some insurance companies may have to make a change to how they settle certain kinds of home damage claims in Michigan next year.

In many cases, insurance companies pay actual replacement costs for property damage claims.

But if the homeowner decides to take what's called Actual Cash Value instead, the company often depreciates or discounts the value of materials to fix the property, to account for wear and tear to the original materials.

The state Department of Insurance and Financial Services says some companies may be deceiving consumers by also depreciating the cost of labor — which is not a physical thing that can lose value from wear and tear.

Beginning next year, labor depreciation will only be allowed if the homeowner explicitly agrees to it in exchange for a lower premium.

Tracy Samilton covers energy and transportation, including the auto industry and the business response to climate change for Michigan Public. She began her career at Michigan Public as an intern, where she was promptly “bitten by the radio bug,” and never recovered.