Replacement Cost (RC) Versus Actual Cash Value (ACV)

Whether you own a home or are a tenant understanding the difference between RC and ACV could make a huge difference in your insurance claim payout. Almost all homeowner and renter’s insurance policies offer only ACV for your contents with the option to add the endorsement for RC.
Due to the competitive nature of insurance some insurance agents will not quote RC until you state that you desire their policy. Then upon filling out the paperwork Landscape Budget Examples will ask if this is something you want to add to the policy. Some people will add it and other being stressed about finances will opt to not take it out.
Usually the agent will then state that it is something they can add anytime in the future which is true. Unfortunately, Growing Vegetables In Raised Beds most people forget to add this valuable feature to their policy and suffer greatly when a claim occurs. Here is why.
Replacement cost will pay you new for old based on today’s prices. Example, if you bought a sofa 5 years ago for 1000 and now it is worth 250 with depreciation, if you have just ACV the policy would pay you the 250. With RC, whatever a like model sofa would cost in today’s market would be what is paid out. If that like kind sofa now cost 1200 then your policy would pay this amount.
If you have a sizable claim it will make a difference of thousands of dollars in what the insurance company pays. The cost of RC on your policy depends on the amount of contents on your policy but it typically runs around 100-150 for a 250,000 home.
So remember to always ask your agent if the quote that they are giving you includes RC so you can make sure you are comparing apples to apples with other carriers.

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