![]() ![]() Recoverable Depreciation in Replacement Cost Value Policies We recommend talking to your agent about the coverage included in your policy and making sure that it is appropriate to cover your needs in the event of a loss. Many policies come as standard Actual Cash Value policies, though in most cases, Replacement Cost Value can be added (at an additional premium, of course). Depreciation amounts are usually determined by a table or chart referenced by your insurance adjuster, and would typically say, for example, that the projected “life” of that sofa should be ten years under normal wear and tear, and so, if the sofa is five years old, the ACV would be $500. However, if your policy is an “ actual cash value” policy (or, ACV), the actual cash value of that sofa would be the replacement cost minus depreciation. That means, if your house burns down and, to replace your sofa it will cost $1,000 to give you that dual-reclining microfiber sofa like you had before your fire occurred, that is the amount the insurance company will pay up to, to replace it. “ Replacement Cost Value” (or, RCV) means, simply, the cost to replace an item in today’s market. Understanding the difference between these terms is important because which policy type you have on your home or business will have a drastically different outcome on the monetary settlement of your claim and how those questions are answered. ![]() Working in tandem with these goals in mind are pressing questions that wonder how much you will be paid, how you will be paid, when you will be paid, and soon after you ask those questions, you may start to hear terms like “actual cash value”, “replacement cost value”, and “recoverable depreciation” tossed around by your adjuster. Whether your house has burnt to the ground and nothing remains, or your hot water tank flooded your basement, filing an insurance claim can be a whirlwind of phone calls, meetings with adjusters and mitigation/rebuilding contractors, stacks of paperwork, and surmounting frustration and confusion through this entire process in which the only goal in your mind is to get your claim paid, repair/rebuild your house, fill it with things, and get your family back to normal. Experiencing any type of catastrophic loss, no matter the size, can be beyond daunting and overwhelming. ![]()
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