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Actual Cash Value vs. Replacement Cost

Feb 22, 2012 9:54:00 AM

493888 golf bag and buggyAt Armour Insurance we work with you to try and obtain insurance that will provide payment based on the replacement cost of damaged or stolen property. A Replacement Cost Policy compensates you for the actual cost of replacing your property. If your golf clubs are stolen, a replacement cost policy will reimburse you the full cost of replacing it with new golf clubs of like kind and quality without taking into consideration the fact that your clubs are four years old. In other words your settlement is not depreciated when you have replacement cost.  

Replacement Cost is not always available to our customers and the best coverage available through our markets is actual cash value (ACV), or market value. Older buildings and vacant buildings are often covered on an actual cash value basis. 

Actual cash value (ACV) definition: ACV is equal to the replacement cost less any depreciation (ACV = replacement cost - depreciation). Another way to think about Actual Cash Value is It represents the dollar amount you could expect to receive for the item if you sold it in the marketplace today.

What Does "Replacement Cost" Mean?

The term "replacement cost" is defined in the policy. It is the cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose. This applies unless the limit of insurance or the cost actually spent to repair or replace the damaged property is less. Refer to your policy for the exact definition and explanation of replacement cost or call your ARMOUR Insurance representative .

What does "Actual Cash Value" Mean?

The insurance industry's traditional definition: the cost to replace with new property of like kind and quality, less depreciation.

At Armour Insurance we are Working Today to Protect Your Tomorrow.

Call us at 780-475-0959 to discuss the Replacement Cost option.

Armour Insurance Group completes yearly reviews on your insurance policy. Representing many top Insurance Companies to provide our customers competitive rates and coverage.
Rob Marusin

Written by Rob Marusin


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