Actual Cash Value v. Replacement Cost Value

Although the terms Actual Cash Value and Replacement Cost Value are not commonly used outside of the property insurance disputes, they can have a substantial effect on the amount of money you receive from your insurance company after a loss. 

After your insurance company determines that your insurance policy provides coverage for your loss, the insurance company has various ways to calculate the value it will pay for your lost or damaged property. There are two main methods by which the insurance company calculates the value of your damage property – Actual Cash Value and Replacement Cost Value. 

Actual Cash Value 
Actual Cash Value (“ACV”) represents the actual dollar value of the damaged item in its depreciated, but not damaged condition. Replacement Cost Value (“RCV”) represents the cost to rebuild or replace the damaged item with a new one. For example, let us say your five-year-old 55” television was destroyed by a covered cause of loss. Since television prices are constantly dropping, the television you paid $1,000.00 for five years ago may now have a present :actual cash value” of only $200.00, which represents what you could actually sell a five year old television today.

Replacement Cash Value
On the other hand, let us say the cost today to replace your damaged television with ab rand new 55” television is $800.00 – which would represent the Replacement Cost Value of the television. Replacement cost insurance is designed to cover the difference between what property is worth and what it would cost to rebuild or repair that property. In essence, it is insurance to protect the depreciation of the uninsured property. 

Check your current policy and see what type of coverage you have. Knowing before the damage occurs reduces any future surprises that are hidden throughout your policy.

IF YOU HAVE ANY QUESDTION ABOUT YOUR PROPERTY INSURANCE CLAIM – CALL THE BUIVIDAS LAW GROUP AT (856) 428-6336