Replacement value is the cost of a brand-new replacement for a lost, stolen, or damaged item.
If you have Replacement Cost Value (RCV) coverage, your policy will pay the cost of a brand-new replacement. If you have Actual Cash Value (ACV) coverage, you’ll get the cost of your replacement or repairs up to the depreciated value of your asset. At Green Family Insurance Inc., serving Springfield and all of Central Illinois, we write insurance for the replacement value of cars, homes, boats, and personal property of all kinds.
What’s the difference?
Let’s consider the story of two families, the Smiths and the Joneses.
Both families experienced $25,000 worth of hail damage to their roofs. The Smiths have Replacement Cost Value (RCV) coverage, and the Joneses have Actual Cash Value (ACV) coverage.
Let’s suppose both families have a $1,000 deductible. The Smiths will receive $24,000 for roof repairs and replacement. That’s the $25,000 in damage minus the $1,000 deductible. The Joneses won’t. Suppose their roof was already 20 years old, and the shingles were rated to last just 25 years. And let’s suppose they paid $10,000 for their roof 20 years ago.
The value of their roof would have already depreciated $8,000 over the last 20 years. (The math is $10,000 minus depreciation of 1/25 of the original roof cost times the roof’s age.)
Even if the roof is repaired, it would only be worth $2,000. Their insurance policy has a $1,000 deductible, so they would only get $1,000.
Some of your possessions become more valuable with age, but most of them don’t. In most situations, you want to be sure that your insurance covers replacement value, not depreciated value.
Wherever you live in Central Illinois, Green Family Insurance Inc. can ensure you get the coverage you need. Call us today!
