What is the difference between ACV and replacement cost besides the price?

Answer 1

Actual Cash Value, is replacement cost minus standard depreciation for age.

So, take a television. Assuming a television averages 6 years of life, you have a television stolen from your house. It cost you $500 brand new. Replacement cost for it today, let's assume is $500. But, 5/6 of it's life has been used up. If you have ACV, you get whatever life is left, or 1/6 of the cost to replace, which is $83.

If you have a large loss, depreciation can eat away the claim payment pretty quickly. Different items depreciate at different rates - computers & other electronics in about 3 years, clothing in about 4, large appliances in 10, etc. It's not YOUR opinion about how much life is left, but a straight chart that the insurance adjuster has.

I ALWAYS ALWAYS recommend replacement cost on both contents and dwelling.

Answer 2

In the car business, a lot. ACV is actual cash value and usually represents what a dealer will pay you for it outright. Replacement value is what you have to pay to get an reasonable replacement. The difference can be thousands of dollars.

Answer 3

ACV, as previously stated, is the actual cash value. (I'll use cars as an example.) It's an average of vehicles similiar to yours in terms of year/make/model/mileage/vehicle options/condition. The figures are found by doing a search of your vehicle in your market area, from dealerships, classified ads.

Replacement cost is what it actually costs to replace your vehicle.

Answer 4

You should RARELY ever consider an actual cash value policy unless you really can't afford the insurance.

If you have a large loss....the depreciation on the items you own will be so great, you won't have enough money to replace them.

Replacement value insurance makes certain you get enough proceeds to buy what you lost.