Chances are, you probably have some kind of insurance. But do you know what exactly is covered, what type you have, or even what it all means? Insurance policies can be confusing and misleading, but we’re here to break down some of the most important information for homeowners to know.
In an insurance policy, there is a specific language used to determine what exactly is covered or excluded, and how much each item can be claimed for. While insurance policies can read like Greek to some, breaking down each term can help policyholders understand what it all means and how it can actually help them.
Two initialisms you might see in an insurance policy are RC and ACV. RC stands for ‘replacement cost’, and “will pay the difference between the Actual Cash Value and the amount you actually spend to replace damaged property with like kind and quality”, according to Farm Bureau Insurance. ACV, on the other hand, stands for ‘actual cash value’, and is “the value of an item at the time of the loss”. During the claims process, policyholders may encounter one or both of these terms.
Actual Cash Value (ACV)
When determining how much homeowners will receive from an insurance claim, insurance companies will look at the ACV of an item. Depending on the age, wear from use, market value, and more, the ACV may change and the homeowner may receive less in return. However, an insurance policy is typically designed in a way that can pay for property damage at its Actual Cash Value.
Replacement Cost (RC)
RC insurance coverage can be more expensive, as the idea is more simple but more expensive for the insurance company. RC coverage replaces the item with one of similar quality. If a car is totaled, for example, RC coverage would replace the car. With ACV, on the other hand, a claim would only pay a policyholder as much as the totaled car was deemed worth before it was totaled.
Which Type is Best for Property Damage?
When determining the best course of action in dealing with property damage, it is important to understand the options available. To help you decide what type of coverage you should get or understand what you have, here are a few facts:
- Replacement Cost coverage typically provides more coverage than Actual Cost Value.
- RC, however, can cost much more over time.
- ACV is a popular choice for homeowners to save money while still having protection.
- Depending on what your policy covers, it might be worth having a professional take a closer look for you.
At Res Reps, we can help you understand how to spend the least amount of money and make the most of your insurance policy. We do all of our work for free for our clients, because we believe that homeowners shouldn’t have to struggle to live in their homes when their insurance should cover their damages. Get in touch with us today to see how we can help you with your property damage.
What Do ACV and RC Look Like in Action?
In terms of property damage, figuring out how ACV and RC coverage might work for you can seem tricky. While it might be simple to imagine a physical object being replaced, what happens to a damaged roof or a flooded basement? Chateau Public Adjusters has an excellent example:
In terms of ACV, “a brand new roof might have cost a homeowner $20,000 ten years ago when the home was insured. If the expected lifespan of the roof is twenty years, then the homeowner can expect an insurance company to deem the current Actual Cash Value of an undamaged ten-year-old roof to be $10,000.” If a property owner had RC coverage instead, “a homeowner with a damaged 10-year-old roof would have the total cost of a full roof replacement paid for by insurance.”
Have a Question? We Can Help.
After working with contractors ourselves, we identified areas that we could improve on. Insurance companies are notorious for treating homeowners poorly, contractors are continuously taking advantage of them, and public adjusters charge hefty fees without putting up a fight. We want to be different. Let us help you get through this tough time; call today for a free consultation at (321) 537-9991, or send us an email to shoe@resreps.com. Let’s get started together.
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