Icon Icon Icon Icon Icon Icon

Replacement Cost vs Actual Cash Value?



There are different options to consider when insuring your house or your belongings. Most common method is replacement cost valuation (RCV) and most home insurers offer this option of coverage. Standard home insurance policies offer RCV coverage for the dwelling and optional for contents of your home.

This valuation method will replace your lost or damaged items with equal value. For example, a TV that you purchased for $1,500 three years ago would be replaced with equal value today, without any depreciation. Keep in mind that you still must pay your deductible.


On home insurance policies, RCV is the amount of money that would take to replace your damaged or destroyed house with a similar home in size and modern materials in today’s market. You will notice the RCV amount is sometimes significantly higher than what you paid for your house or what you paid to build it, because it would cost more to build a brand-new house on your property in case your house is destroyed.


Actual Cash Value


Another way to insure your house or your contents is called Actual Cash Value or ACV. This cost valuation considers depreciation of covered dwelling or items. This option comes with a lower insurance premium, but it also means your payout would be lower in case of a covered peril.


Using the same three-year old TV mentioned earlier, your damaged or stolen TV would be worth considerably less today than when you purchased it new, after taking depreciation into account.

In other words, your payout amount for your TV would be estimated as a used item with the current market value.


Ultimately it is up to the insured to decide which coverage suits them best. In some cases where homes are financed, lenders may require you to get replacement cost coverage on your house.


With Renters insurance policies, premium difference between ACV and RCV is relatively small, so it’s always better to ask for replacement cost coverage for your contents. For additional info about renters insurance click here.


At Bargain Insurance Connection we have variety of companies and coverage to choose from. For additional consultation or quotes call us at 816.453.7722 or fill out online forms for Home Insurance or Renters Insurance.

Share |

No Comments

Post a Comment
Required (Not Displayed)

All comments are moderated and stripped of HTML.
Submission Validation
Change the CAPTCHA codeSpeak the CAPTCHA code
Enter the Validation Code from above.
NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
Blog Archive
  • 2020
  • 2019
  • 2018

View Mobile Version
Click for the BBB Business Review of this Insurance Companies in Kansas City MO

© Copyright. All rights reserved. Powered by Insurance Website Builder.
Bargain Insurance Connection Twitter