Insurance Proceeds Shortfall Calculator

Total insurance proceeds rarely match the total loss stack. This calculator rolls up the shortfall.

Replacement cost

Policy limit

Deductible

Depreciation %

Coinsurance penalty %

Shortfall to owner

$581,280

Gross proceeds

$668,720

Recovery %

53.50%

How the math works

Proceeds = min(RC, limit) × (1 − dep) × (1 − coins) − deductible. Shortfall = RC − proceeds.

Owners consistently underestimate depreciation on actual cash value policies. Assume ACV roofs, HVAC, and exterior components depreciate 40-60% by year 12 — the RCV conversation at renewal is the cheapest insurance upgrade available.

How to Use

Enter total loss replacement cost.
Enter policy limit.
Enter deductible.
Enter depreciation/ACV haircut.
Enter coinsurance penalty.
Read shortfall to owner.

Frequently Asked Questions

Common causes?

1) Policy limit below RCV (underinsurance). 2) Large deductible. 3) ACV vs RCV depreciation. 4) Coinsurance penalty for underreporting. 5) Excluded perils (flood, earthquake, sewer backup). Each stacks.

Coinsurance math?

If insured amount ÷ required amount < 1, claim pays proportionally. Example: $500k policy on $800k required coverage (62.5%) on a $100k loss pays $62.5k before deductible. Check 80%/90%/100% clauses in policy declarations.

Preventing shortfall?

Annual replacement cost review, not market value. RCV on insurance appraisal, not zillow. Update policy limits after major renovation. Check deductible structure (per-occurrence, aggregate, wind/hail carve-out).

How does this affect my portfolio-level metrics?

Single-asset impact rarely matters in isolation for a portfolio of 20+ assets, but systematic patterns do. If the same issue shows up across 10% of your portfolio, the aggregate impact is meaningful. Track this metric at the portfolio level quarterly. Institutional operators aggregate these monthly into a KPI dashboard for investors and lenders.