Do you know the difference between Actual Cash Value (ACV) and Replacement Cost?

If you experienced a sudden loss, would you know what your homeowner’s insurance covered? Most have no idea or they assume everything would be covered (which is not always the case). What many don’t realize, is there are two important options when selecting insurance for your home; there is Actual Cash Value (ACV) and Replacement Cost. One costs more than the other.

Actual Cash Value (Personal Property) – This will cover your home and possessions for their market value at the time of the loss. For example: If you purchased a TV 5 years ago for $2,000, your insurance company will only cover the cost of the TV minus 5 years of depreciation. Which means it’s likely worth less than half today. The same goes for your home, they will only cover the cost to replace your home minus the depreciation over the years.

Replacement Cost (Personal Property) – This will cover your home and possessions for what it would cost to purchase a new or similar item today. The same goes with your home. It will replace your home for what it would actually cost to rebuild the structure today. (Prepared’s Titanium package includes Replacement Cost.)

The two options above can mean the world should you lose everything, or lose a large amount of your home/possessions. We cannot stress enough; how important it is that you understand what you’re truly covered for. Go over your policy each year with your agent. Maybe you have some policy discounts you qualify for now. It never hurts to ask.

Don’t have an agent? I would highly suggest finding a local independent insurance agent. At Prepared Insurance, we work with almost 600 independent insurance agencies across the state. What’s great about working with an agent, is they do all of the work for you. They will shop around with the various companies looking for the best policy for you. They will likely come back with a few suggestions. Go over each option with your agent, ask questions, make sure you understand what you’re signing up for. You do not want to be surprised the day you make a claim.

Fox WFTX Channel 4 News did a story about a woman who lost everything, and unfortunately, she wasn’t fully covered. It can happen to anyone. Are you covered?

house fire - check your policy