Property insurance claims are usually reimbursed using one of two calculations:
Actual Cash
Value (ACV) or Replacement Cost Value (RCV). Some policies even include elements of
both.
Understanding the difference between these types of policies can help you with
planning for recovery in
case you ever need to file a claim.
ACV is calculated by determining the property’s value “new” and subtracting
depreciation. This
is the case regardless of how worn or pristine the item was at the time it was
damaged. Imagine you
bought a TV 5 years ago for $2000. Today, that TV is worth $300. If you have ACV
coverage, the
insurance carrier will pay you $300 (what an old TV is worth). If you had RCV
coverage, the carrier will
pay what it costs to purchase a brand new TV of like kind and quality.
RCV is calculated based on the replacement cost of the property that was lost. If
you had an RCV
policy, the TV that was damaged or stolen in the above scenario would be fully
replaced without any
extra “out of pocket” for you, regardless of how old the item is. Even if your TV
was 10-years-old when it
was stolen, you’d be able to replace it with a new one. Monthly premiums for RCV
policies tend to be
slightly more expensive than ACV policies.
This same idea carries over to building coverage as well - say a tree damaged your
roof, would
you want money for a used roof or a new roof?
We would love to answer any questions that you might have. Contact Kovalev Insurance
today
and request a complimentary consultation to ensure your property is properly
protected.
