What is “Actual Cash Value” or ACV?
Spring is here in Nebraska and if you are like many you are already dealing with severe thunderstorms.
When hail storms, lightning strikes or tornadoes happen you might be digging out your policy to see what you are covered for.
If your property is damaged and you file a claim, there are a couple of ways the repair/replacement will take place.
You could receive full value replacement, or an actual cash value replacement.
So you might still be asking, what exactly does actual cash value mean?
When "actual cash value" is used in a policy, a policy owner is entitled to the depreciated value of the damaged property.
In other words that means the insurance company takes the Current Replacement Cost – Depreciation = Actual Cash Value of the item.
The reason behind this is that it recognizes the reduction of value as the property ages, becomes obsolete, and is subject to wear and tear.
In some cases you can talk to your insurance agent and they will guide you on what requirements it takes to have a different valuation method for your items if possible.
This method of valuation can apply to personal property, your roof, your actual home, additional structures like awning or window coverings, and etc.
Many times “actual cash value” will be abbreviated to ACV.
A common example of when ACV is used in a policy is if a roof on a home is getting old or worn down, the insurance company will likely tell you to either replace the roof before something bad happens or that damages will be moved to an actual cash value basis.
6/9/2022 08:48:52 pm
Great reading your posst
Essentially, the real reason for actual cash value basis in insurance is that technically you shouldn't be better off after a claim payment. That would open up all sorts of moral hazard. i.e. people could knowingly damage their old belongings so that they get a brand new one.
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