Actual Cash Value (ACV) vs Replacement Cost Value (RCV)
Has it been a while since you reviewed your insurance policies? If so you may not be aware of how your insurance company will replace certain items such as your roof and personal property. It’s important to understand the difference between Actual Cash Value Replacement and true Replacement Cost Value. Let’s take a minute to look at some of the differences.
Actual Cash Value - ACV
Here at the Greco Insurance Agency of Farmers Insurance, we like to think of Actual Cash Value coverage as being equivalent to having someone come into your home and give you garage sale prices for your personal property. For example, you own a 60" flat screen that you paid $1,500 for a few years back. If sold in a garage sale a person may offer you $500 dollars for the TV. This would be considered a depreciated value for your TV. If you carry Actual Cash Value on your personal property then in the event of a loss your insurance company will essentially provide you with garage sale prices to replace those items. This leaves the insured with out of pocket expenses to replace the property they already owned.
Replacement Cost Value - RCVI don’t know about you, but In the event of loss I want my personal items replaced without having to come out of pocket. This is where Replacement Cost Value comes into play. If your insurance program has Replacement cost Value on your personal property then your items will be fully replaced. For example, in the event that you suffer a covered loss to your 3 year old 60" flat screen TV your insurance company will replace that TV with the current comparable equivalent.
Knowing the differences in your insurance coverage is crucial should you ever suffer a loss. It’s important that you review your insurance program frequently to ensure that you are aware of the coverage you currently hold. Keep in mind that with some companies, coverage and deductible options can change upon renewal and you may not even be aware of the change. If it has been a while since you have reviewed your current insurance program then The Greco Insurance Agency of Farmers Insurance would like to offer you a Farmers Insurance review. We can compare our coverage with that of your current company and if you are an existing client by all means give us a call to schedule your annual review.
