Difference between “Actual Cash Value” and “Replacement Cost”

How it Works

Homeowners insurance policies offer actual cash value or replacement cost coverage to replace your damaged, stolen, or destroyed personal property.

• Replacement cost is what you would pay for the item at today’s cost.

• Actual cash value is what you would pay for a similar item at today’s cost minus depreciation (replacement cost minus depreciation).

• Depreciation is a decrease in value due to wear and tear or age.

Claim Scenario

Your home and some furnishings were damaged during a recent wildfire. You made a claim to your insurance company and have met your deductible. Now you are looking at replacing the damaged furnishings. Last year, you bought a sofa for your living room for $2,000. The amount of money you will receive to replace your sofa depends on the type of coverage you have.

• If you have actual cash value coverage, the company might pay you $1,500 because that is the actual cash value of the sofa today (replacement cost minus depreciation).

• If you have replacement cost coverage, the company will pay $2,100 because that is what it would cost to buy a similar sofa today

Note: If you have replacement cost coverage, most insurance companies will give you the actual cash value of an item and require you to submit a receipt for the new item before paying you the remainder.

Comments

Factors That Affect Car Insurance Rates

You may not realize it, but your overall rate is also affected by many more different factors – some of which you can control, and many of which you cannot. However, knowing what affects your rate can help you make a more informed decision when purchasing insurance, and can help you know exactly what to do to lower your expenses. Demographic Factors Your gender, age, marital status, geographical location, and credit score all affect your insurance rates in different ways. 1. Gender and Age Young men usually incur higher rates than young women as statistically, more male teenagers have accidents than female teenagers. However, older men generally have better rates than older women. Some evidence suggests that older women are in more minor accidents than older men – though the difference in premium costs usually isn’t drastic. 2. Marital Status Married people tend to have fewer accidents than single people; therefore, getting married (especially for men) can significantly ...

Business Liability Insurance

It’s a simple reality that anyone who comes into contact with you or your employees while you’re conducting business can file a claim or lawsuit against you for any number of reasons — from physical injuries to wrongful termination. That’s why Farmers® offers small business liability insurance, which can help with challenging situations and the associated costs of legal defense and legal damages, up to policy limits selected for covered claims. Because I am also a small business owner, I have an understanding of some challenges faced by small businesses like yours. I can offer insights and discuss insurance options as you choose customizable coverage options for your company. Give me a call to save money on your Business Insurance . Some of our Commercial insurance coverages include Business Owners Policy (BOP) , Commercial Auto , Commercial Property , Contractors , and General Liability .

Affinity Discounts

Everything’s Bigger in Texas…Especially Farmers’ Smart Insurance Discounts If you’re employed or retired from an approved occupational group (e.g., Accountants, Educators, Engineers, Firefighters, Military, Law Enforcement, Medical Professionals, etc.), you may be eligible for this discount. Contact us at (210)722-8220 or mmetzger@farmersagent.com to see if you qualify.

Farmers Insurance - Matt Metzger

Search This Blog