When weighing replacement cost insurance vs. actual cash value, it's important to understand the difference between the two types of coverage.
Actual Cash Value
Simply put, actual cash value depreciates the value of items at the time of the insurance claims assessment. Even the best insurance depreciation calculation varies by the item insured, the insurance company and the individual insurance claims adjuster (among other factors).
Replacement Cost Value
Replacement cost value does not depreciate the value of items insured at the time of the insurance claims assessment. Replacement cost is the actual cost to replace an item destroyed or damaged in the event of a covered loss by an insurance company. For a more thorough overview of actual cash value and replacement cost value, read an article on the homeowner's insurance policy.
Replacement Cost vs. ACV
Replacement Cost, actual cash value and general notes about finding a cheaper insurance policy:
- Replacement Cost increases the cost of an insurance policy. But if you ever need to file a claim, you’ll be glad you have it.
- The biggest benefit to sticking with actual cash value insurance is that it's a cheaper insurance policy. But, there are cheap replacement cost insurance policies out there- work with an insurance agent to find the best policy for any home or business.
- If replacement cost insurance is present on the policy, the policyholder may have to provide a value for the items insured in case of claims. Regardless, receipts, video, and itemized inventories stored at a remote location make the insurance claims process an easier and faster one.
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