What Homeowners Should Know About Actual Cash Value and Replacement Cost
Much like everything else we buy, insurance comes with a lot of options. When selecting homeowners insurance in Hudson, NY, homeowners will be faced with the option of actual cash value or replacement cost. These terms are loss valuation methods insurance companies use to determine how much money they will pay out in the event of a covered claim after any deductible is applied. Here’s what you should know about the differences between the two options.
Actual Cash Value
The actual cash value, or ACV, is the economical choice because it requires that you pay the lowest premiums. That is because depreciation is taken into consideration. As time goes by, the monetary value of your belongings may go down, and this is known as ‘depreciation.’ If your possessions are destroyed by a covered loss and you have ACV coverage, your insurance agent will subtract your home’s depreciation from the amount of money that is required to repair or replace your items to the condition they were in before the disaster.
Replacement Cost Value
The alternative to actual cash value is replacement cost coverage. If your belongings are destroyed and you have replacement cost value, your coverage would provide you with a payment equal to that required to replace lost items. Depreciation of your items is not a factor in the settlement you receive from your insurer.
To fully understand your coverage and select the right policy for your needs, contact the team at Kneller Agency, serving Hudson and neighboring cities in New York.