Why is it so important for individual policyholders to know the difference? There are many reasons.
- If you buy an ACV or Actual Cash Value Policy you will only get the depreciated value of items and if you suffer a loss you could end up with 10-20% of the value of the items. This will not be enough money to replace them.
- Replacement Cost Policies will sometimes depreciate items to Actual Cash Value or ACV and you will have what is called recoverable depreciation that you can recoup if you buy the item or replace it. The insurance company makes sure they never explain this to many people and people will get the small check and never get the money the insurance company owes them and the insurance company knows this. Its a tactic to keep profits up in our opinion.
Replacement Cost– The term replacement cost or replacement value refers to the amount that an insurance carrier would have to pay to replace an asset at the present time, according to its current worth.
Actual Cash Value– Actual cash value is the amount equal to the replacement cost minus depreciation of a damaged or stolen property at the time of the loss. It is the actual value for which the property could be sold, which is always less than what it would cost to replace it.
You should always have a Public Adjuster look over your claim before you file it to explain to you how the process may work but if they have already paid you and issued an estimate then a Public Adjuster can explain and review the claim and see if there is money still owed that they need to pay you and if they paid you properly for all your damages.