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Replacement Cost Value vs Actual Cash Value

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Replacement Cost Value vs Actual Cash Value

Replacement Cost Value vs Actual Cash Value

PhotoCredit: The Florida Insurance Guy

Replacement cost and actual cash value are two terms that are often used in property insurance. These two terms can have a number of effects on the overall amount of money that you could receive from an insurance claim. 

When your insurance company starts to determine that your insurance policy will provide coverage for loss, there’s a number of ways you can calculate the overall value that is paid out to you for lost or damaged property. Two of the main methods that an insurance company will calculate for damaged property includes the replacement cost value as well as the actual cash value.

Actual cash value represents the dollar value on a depreciated or damaged item. The replacement cost value is a representation of what it would cost to completely rebuild an item or provide replacement for a new one. An example of actual cash value could be a car that you paid $35,000 for a year ago that you could sell today for roughly $23,000. The replacement cost for the same vehicle may be represented as $35,000-38,000.

Most insurance companies are only required to pay damages on the actual cash value of a particular asset. There’s no obligation for the complete replacement or repair of a damaged asset in some cases. Looking at a policy for the replacement cash value can make sure that you can have the funds available to handle subsequent damage payments. 

If you need assistance with interpreting your policy or if you have any questions on whether or not the payments you will receive will be sufficient for covering your potential losses, contact our insurance law team today. We would happily discuss any claim with you as well as assist you with the process of managing compensation for a loss. 

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