Replacement Cost-

Usually defined as paying the cost to replace an insured item at the cost of a similar item with like and kind quality, WITHOUT depreciation for age and condition of the item.

Actual Cash Value

Usually defined as paying to replace an insured item with like and kind quality WITH depreciation for age and condition of the item.

Many home policies insure the structure, contents of the structure, and the roof at replacement cost.  While things like the fence may be covered with Actual Cash Value coverage.  It varies by company, so it’s good to know what your home, roof, and contents coverage are.  If replacement cost is available and affordable, it is usually advisable to purchase this type of coverage over actual cash value for your home.

ACV (Actual Cash Value) coverage in contrast, applies to most auto policies.  So if you are driving a 2000 Honda Accord and are carrying collision coverage and total the vehicle, if it’s insured on an ACV policy (which most are) the insurance company then tries to determine a reasonably fair price to give you to replace the vehicle with a similar vehicle NOT replace it with a brand new Honda Accord.  So they depreciate for the age and condition of the vehicle.

There are always exceptions to the above mentioned norms, so individual circumstances and market conditions will dictate what types of coverage are most appropriate.  However knowing what these two types of coverage are and finding out what you have will most certainly reduce the chance that you are not covered in a way that you are hoping for.

We are here to help with this or any of your insurance needs.  Feel free to contact us today!