SECTION 5.9752. Notice of Material Change-Change from Replacement Cost to Actual Cash Value

(a) A material change includes a change from replacement cost coverage to actual cash value coverage. The change might be to the entire policy, or to any part of it. This section applies only to changes from replacement cost to actual cash value.

(b) A notice of material change must explain the terms "replacement cost" and "actual cash value." Using plain language, the notice must at a minimum explain that:

(1) for replacement cost, the policy will pay to repair or replace the damaged item based on the current cost of the item; and

(2) for actual cash value, the policy will pay less based on the item's characteristics, such as age or condition.

(c) If the term "depreciation" is in the notice, the notice must use plain language to explain that "depreciation" is the amount of value that an item loses over time, typically through use, wear and tear, or by becoming obsolete.

(d) A notice of material change must include at least one plain-language example that shows the difference in dollar amounts between coverage before and after the material change.

(1) See Figure: 28 TAC §5.9752(d)(1) for one possible way to list the amounts a policyholder might receive for a total roof replacement. Insurers are not limited to using the Figure as the example, and they may use other content and formatting.

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(2) If the policy includes a depreciation schedule, the notice of material change must list the form name and page number that contains the depreciation schedule.

Source Note: The provisions of this §5.9752 adopted to be effective February 12, 2020, 45 TexReg 909