Difference Between "Actual Cash Value" and "Replacement Cost Value" with Personal Property

To explain the difference we need to start out by explaining what each is separately. Replacement Cost Value “RCV” is a coverage that pays to purchase new at the current market value with no regards to depreciation. Actual Cash Value “ACV” is replacement cost value minus the depreciation. Depreciation is the decrease in adjusted value due to wear and tear or age. 

Let’s play this out in a scenario. You have a $3000 flat screen television, your tv is stolen so you file a claim. If you have RCV coverage they will replace the TV an equivalent make and model minus the deductible. Under ACV coverage, they will deduct depreciation from the value of the TV and you will have to pay the deductible also.

RCV coverage can cost a little more but in the long run your property is replaced at today’s prices with no depreciation, just the deductible being applied. Under ACV you may have to pay a lot more out of pocket to replace your property due to the deduction of depreciation and your deductible. So it’s up to you. Do you want to pay a little more for the added coverage or take the chance and pay more in the end when you go to replace your item.

 So contact your insurance agent to see what type of coverage you have on your contents. Because it may not be what you think.

If you would like to discuss any of your insurance needs and questions, please contact one of associates by calling 517-337-6000 or visiting our website www.hksagency.com.