Homeowners Personal Property Actual Cash Value (ACV) vs. Replacement Cost (RC)
As we discussed in my earlier posts, reducing the overall coverage limit for your Contents or Personal Property Coverage C of your Homeowners insurance policy in Florida is one way to lower your overall premium.
Another way to increase your savings is to look at the Actual Cash Value designation for this Personal Property Coverage on your homeowners insurance. ACV or Actual Cash Value will cost less for your annual insurance premium. However, ACV will account for Age and Depreciation for your items of Personal Property when a Covered Claim is being settled. If you have a Fire, or Water Damage, Explosion, Smoke, Theft, Vandalism, or any of the covered perils on your Homeowners policy and ACV is what you chose, be prepared to receive less money for each of your items than if RC was paid for. RC or Replacement Cost will pay you like for like, in today s dollars for your items of Personal Property, not accounting for Age or Depreciation as ACV does. RC will definitely cost more, but you will get more value for each of your Contents items when a Covered Claim occurs.
For instance, if a TV is part of a Theft Claim, the claims adjuster for the insurance company will decrease the value of the TV set for each year of age when ACV is on your policy. However, if your paid for the Replacement Cost -RC- coverage, then the value of that TV will be based on what it would cost to purchase a similar make/model in today s market. RC in this example may put hundreds of dollars in your pocket during this claim just for this one item. On the other hand, if your items are older and perhaps not as valuable (how much is that 10 year old couch really worth?) then ACV or Actual Cash Value might be worth a hard look.
At the end of the day, it is really a personal decision. I have many customers who see the value of their insurance and want to purchase the best coverage that they can. These folks understand the value of insurance and also may have considered the turmoil of such events as Hurricane or Fire damage, when the last thing you want is to be nickel and dimed by the insurance company. The flip side to this argument is that ACV will take a significant bite out of the insurance premiums each year. Money that can be used to pay bills, make home improvements and simply make your Homeowners insurance more affordable. Choosing ACV means that you as the insured, understand that a lowered value will be given to your items of Personal Property / the Contents of your home when a claim is processed.
blog log, by keith royle