When it comes to your home insurance policy, little things like actual cash value and replacement cash value sound alike, but, have a huge impact on your wallet. What is the difference and why does it matter? When it comes to covering your most prized possession and in many cases your biggest asset, your home. Making sure you are covered correctly is key.
Did you know, that replacement cost on dwelling A is not automatic? In most cases, it means replacement cost up to policy limits or the co-insurance clause at time of loss. An endorsement can be added to ensure full replacement but it is important to read your policy.
Example: Dwelling covered at $380,000. Home burns down, and is a total loss. After a determination of replacement cost reveals the actual replacement cost value is $500,000 insured is not well below the 80% co-insurance clause. Insured will be responsible for anything above the $400,000 less the deductible. If the home was insured above the 80% threshold, it would be covered.
Replacement Cost Value is the preferred coverage for every one of our clients. Why? When it comes to covering your home due to hurricanes, fires, and any other peril you may encounter, Replacement Cost Value replaces the home, or property to its original state or close to it as humanely possible. Every carrier is different, and they have options to declare RCV or ACV. In Florida roofs are a big issue when it comes to hurricanes. If your roof is destroyed due to the wind, and water damage, the roof will be either 100% replaced or fixed to like new condition. Many times with a good carrier they will replace it. Same goes for personal property. In the event of a fire, many times we do not realize how much are PP actually costs, until the need arises to replace it. RCV will completely replace your personal property as long as it is documented. An example of a couch, TV clothing, once you buy it, resale value is very little. RCV will replace it.
Actual Cash Value is what the cash value is at the time of loss. Much like a car, that depreciates, so does everything we buy. Some items more than others. Electronics, most furniture. Have you ever tried to sell a couch that you just bought for $2000, only to get a couple hundred bucks for it?
ACV works in the same way. While ACV costs less on your insurance policy, it also replaces much less. In the event of a lost roof, that is 14 years old, at the end of life, you might only get a few thousand dollars, and have to cover the rest out of pocket. While still having a deductible. If the roof costs $15,000, ACV might only be $3000, thus having to cover that gap your self.
Same goes for personal property. If all your personal belongings add up to $100,000 to replace, ACV might state that those are only worth $20,000 thus leaving you with a expense of replacement. RCV will replace the $100,000 as long as it is documented and you have pictures.
It matters because knowing exactly what your policy covered and does not can save you and your family grief up partial or total loss. ACV costs less annually, but the small savings down the road could equate to massive out of pocket expenses. RCV is the preferred coverage, as the goal of having insurance is to bring you back to the same position you were at time of loss. To learn more or get a no strings evaluation on your policy and coverage, click the learn more button below!
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No two businesses or homes are the same, therefore we custom tailor coverage's that meet your needs. We do not sacrifice our INTEGRITY for financial gain, and we are HONEST in everything we do.
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Providing a policy is not enough. Education on the policy and coverage is important; so that you can make informed decisions on how much or how little coverage you need.
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