How Do I Choose Between Replacement Cost Coverage Or Actual Cash Value Coverage?
Updated: Aug 18, 2022
Definitions of ACV (Actual Cash Value) Coverage and Replacement Coverage
Deciding which type of homeowners insurance coverage is best for your home can be a daunting task. With ever-rising costs, most Florida homeowners want to get the best possible coverage, for the least amount of money. Determining which type of coverage is right for you starts with understanding two important insurance terms:
Actual Cash Value (ACV): is the amount needed to repair or replace an item, less depreciation.
Replacement Cost: is the amount needed to repair or replace your damaged property with materials of similar kind and quality, without deducting for depreciation (the decrease in the value of your home or personal property due to normal wear and tear).*
Things To Consider When Choosing Between Actual Cash Value And Replacement Cost:
Age Of Your Home:
The older your home is, the less coverage is provided under an actual cash value policy. For example, your insurance company would deduct for the age and condition of a 15-year-old roof with a 20-year life expectancy. In this scenario, you have used 15 out of the 20 year expectancy. You would be paid for the remaining three years value.)
Cost Of Materials
We are currently experiencing hyper-inflation. Economic changes can drastically impact the cost of materials and services needed for home repairs. Inflation can drive up the premiums on Replacement Cost homeowner's insurance policies exponentially due to rising costs in materials and services.
Deductible costs may be vastly different between an ACV policy and a replacement cost policy. Determining which deductible limits you are most comfortable with is a key factor when deciding which type of homeowner's policy you choose.
These are just a few of the things to consider when deciding between a replacement cost coverage and actual cash value coverage. If you've filed a a homeowner insurance claim due to storm damage in Florida and aren't sure if your insurance company has paid out the appropriate amount based on the type of coverage you have, contact a Florida insurance claims attorney.
Contact A Florida Property Damage Attorney To Get Free Help With Your Claim
Florida Property Damage Attorneys has over 25 years experience in assisting Florida homeowners with their storm damage insurance claims. We will review your claim for free and determine whether or not your claim needs further legal action. Call our offices today at 850-577-1699 to schedule your free consultation.
*To learn more about the difference between Actual Cash Value and Replacement Cost insurance policies, please visit the Homeowners Tool Kit . Examine real life scenarios to gain a better understanding of the outcomes for each type of homeowner insurance policy and their limits.