When it comes to property insurance, there are two types of coverage available: actual cash value (ACV insurance) and replacement cost value (RCV insurance). Although the two are similar in concept, they’re not the same thing.
Both ACV and RCV policies will pay you the current value of your property, but they differ in how they calculate what your property is worth.
Here’s what you need to know about ACV versus RCV and what it means for you:
What is Actual Cash Value?
Actual Cash Value (ACV) is the amount you would receive for your property if you sold it as-is, on the open market, at the time of loss. This is usually less than what your property is worth because it doesn’t include the cost of repairs or replacements. In other words, ACV gives you less money than you need to replace your damaged items.
For example, if your couch was bought 10 years ago for $500 and was worth $200 when it was destroyed in a fire, your insurance company will pay out $200. This is because the couch has depreciated over time and isn’t worth as much as it once was.
What is Replacement Cost Value?
Replacement Cost Value (RCV) is the amount it will take to repair or replace your damaged items and put them back into their original condition. For example, if a tornado destroyed your roof and blew off all of its shingles, RCV insurance would be equal to replacing those shingles with new ones.
RCV typically covers actual damaged items or sections of a property while ACV typically is for the actual coverage of the property instead.
Is ACV or RVC Insurance Best For You?
Figuring out which coverage is best for you depends on many factors. An important one is how long you plan to stay in your home or keep your property.
If you plan to keep your property for several years, then RCV insurance may be a better choice than ACV because it helps replace the value and protect against rising home prices.
If you’re planning to sell soon, ACV may be better because it protects against falling home prices and gives you a price range immediately.
RCV can be more appealing because of the full cost to replace damaged property with a similar quality property but RCV coverage comes with higher premiums (which may be worth it in the long run).
Regardless of which type of coverage you have, you should be aware of insurance companies trying to abuse depreciation to their advantage. Essentially, insurance companies are looking to pay out the least amount of money they can. If you aren’t aware of their tactics, you could be getting less money than you deserve.
When Can Public Adjusters Help With ACV Versus RCV?
Insurance companies can often undervalue your property damage claims and utilize expensive claim adjusters to ensure they are getting the best profit.
In fact, claim adjusters sometimes (not always) exaggerate the depreciation of damaged property, especially when it comes to ACV coverage. Actual cash value = replacement cost – depreciation, so inflating depreciation can be beneficial to the insurance company.
Even though insurance companies are supposed to help you with coverage, they often challenge your claim to make sure they are only paying you the bare legal requirement they can get away with. This is why we are here to help.
Here at Fortitude Public Adjusters, we help you get the most out of your claim process. By working with us, we will help review and guide you through your policy to find out which type of coverage you have and how much in total you should be offered.
Whether you have ACV or RCV coverage, we will ensure a fair claim settlement for you.
