Deciphering Home Insurance: Replacement Cost vs Actual Cash Value
At Advantage Service Insurance, situated in Erie, CO, we acknowledge that insurance terminology might seem confusing. We aim to simplify things for you. In this context, we’ll explain the concept of replacement cost vs. actual cash value as it applies to a home insurance policy.
Understanding Replacement Cost Value
Replacement cost value (RCV) refers to the cost incurred in replacing your damaged or stolen property without accounting for depreciation. If such a situation arises, your insurer compensates you for the entire cost of replacing the damaged property at the current market rate. For instance, if a burglar steals your television and stereo system, your insurance company will pay for brand-new replacements of the same brands as those stolen.
Therefore, RCV offers a more comprehensive coverage and typically demands higher premiums than ACV.
Exploring Actual Cash Value
Actual cash value (ACV) is the amount paid by your insurance company to replace damaged or stolen property minus the depreciation at the time of the loss. For instance, if a house fire destroys your couch, and your policy is set to settle your claim on an ACV basis, you’ll receive reduced compensation owing to the age and condition of the furniture. While ACV doesn’t offer as much for a claim as compared to RCV, the premiums tend to be more affordable.
Making the Right Choice for Your Home Insurance
Our team at Advantage Service Insurance in Erie, CO, is eager to help you choose the most suitable coverage for your home insurance. We can compare rates and coverages so you can make a well-informed decision. Call us today at (303) 500-5020.
