With the stormy season at hand Etler-Kettenacker Agency wants to stress the importance of having the proper coverage for your home in case of an unfortunate event such as storm damage. The most asked about question in regards to home insurance is the difference between home replacement cost and actual cash value (ACV).
When you insure your home with a replacement cost policy if a loss occurs you will receive a reimbursement for the materials that are the same like and kind to repair your damages in order to make you whole again. Your insurance carrier will pay the current costs of the materials needed to make the repairs to your home. A replacement cost home insurance policy may cost a bit more but it is well worth the extra expense.
Actual cash value (ACV) is the other reimbursement method for your home insurance. After a loss or damage to your home an actual cash value policy will pay the replacement cost of the home or materials for repair minus the depreciated value of your home. In other words, the insurance carrier will only pay you what your home is worth at the time of the claim or reimburse you the original cost of the materials to rebuild your home when your home was built. ACV policies are typically less expensive than replacement cost home insurance policies.
Both replacement cost and actual cash value applies to the contents of your home as well. For example, if your stereo system is ruined as a result of a claim the replacement cost home insurance policy will pay for you to purchase a new replacement stereo. If you have chosen the less expensive actual cash value policy you will be reimbursed the cost of the stereo at the time of purchase. This in many cases is much less than what a new stereo would cost and you would be out of pocket when making yourself whole again.
For the best advice speak with one of Etler-Kettenacker Agency’s experiences representatives about which home insurance plan is best for you. But with this information, it is clear that replacement cost is well worth the extra home insurance premium expense.