Is Your Home Covered?
You purchase home insurance to cover losses you may have to your home, equipment and property. There are a number of decisions you make regarding your coverage that will determine how the loss will be viewed by the insurance company. One of the most important aspects of your home insurance policy is how your property is valued; there is replacement cost coverage (RC), and there is actual cash value basis (ACV).
Worthington Insurance can complete a review of your insurance program and show you how to get the most out of your coverage. Call us today.
What Is Replacement Cost Coverage?
Replacement cost coverage essentially means that the insurance company will replace the damaged or destroyed property with new property up to the policy limit, as long as it is with like kind and quality. This may seem simple, but it's not quite that simple in every case. If the value is not accurate, your loss may not be fully covered.
Replacement cost insurance can be purchased to protect home, personal property and more. This insurance pays the full amount needed to replace the asset or property up to the policy limit. Any gradual reduction of the asset value or depreciation is not taken into account for insurance claim purposes.
Replacement cost works for most types of property, however, it's not perfect for everything. A copy of a Picasso is not a Picasso, so fine art is not always covered under a replacement cost policy.
What is Actual Cash Value?
ACV is replacement cost less depreciation. For example, if you have a 16 year old expensive set of china that will cost $5,000 to replace, ACV would value the china at $5,000 minus 16 years of depreciation and wear, which could be as low as $1,000. The depreciation is usually calculated by establishing a useful life of the item determining what percentage of that life remains. This percentage multiplied by the replacement cost equals the ACV.
We almost always recommend RC for all customers.
Worthington Insurance specializes in auto, home, contractor and business insurance as well as insurance in Philadelphia, Yardley, Morrisville, Langhorne, Newtown, Bensalem, Levittown, Bucks County and surrounding areas in Pennsylvania and New Jersey.