Replacement Cost vs Actual Cash Value Coverage- What Is It, and Do I Have It?

All insurance policies have multiple levels of coverage, so your out-of-pocket expenses will vary when you file a claim. On homeowners, renters, or condo policies, your belongings may be insured for either your property's Actual Cash Value (ACV) or its Replacement Cost Value (RCV). But what do those terms even mean anyways?

Replacement Cost Value (RCV) can be summarized as new for old. It's the amount it will take to replace your property or object(s) without any deduction for depreciation. Your insurance company won't care how much it cost when you bought it 10 years ago, but they will care exactly how much it will cost to replace today.

Actual Cash Value (ACV) is most best described as the replacement cost minus depreciation. Depreciation is the factor insurance companies give for naturally occurring wear and tear. Once again, it does not matter how much it cost at the time of purchase, but it does matter how much it costs to replace at this time. Claims adjusters will have depreciation schedules for just about any and every property imaginable.

Something important to keep in mind is that the insurance company will only pay you the Actual Cash Value until you actually replace the damaged property. The insurance company will only pay you one of two amounts- the amount of the loss, or the amount of the policy. The amount you are paid will be the lower of these two amounts.

Still need some help understanding how this applies to you specifically? Call us at (248) 673-1219, or send us a chat on our homepage, to be connected with one of our independent insurance agents, and we'll find you the best possible coverage!