In the insurance business, property is insured for actual cash value or replacement cost. It’s critical that individuals know which method they’re insuring their property under or they could find themselves coming up short if they have to make a claim.
Actual Cash Value
Actual cash value will pay policyholders what their property is worth today, minus depreciation factors that include age, condition, expected lifespan of the item, wear and tear, and minus the deductible. Some items depreciate at a faster rate than others. Depreciated value will be less than the cost of purchasing a replacement.
Policies written for actual cash value are the most inexpensive for individuals to purchase. However, payments for damaged or stolen property will be less and homeowners will pay more out-of-pocket when they’re replacing their possessions.
Insurers prefer writing this type of policy because it saves them money on reimbursement costs on any claim that’s made. If individuals have the savings to cover the out-of-pocket costs, an actual cash value policy can save money on annual premium costs.
Replacement Cost
The alternative is purchasing a policy that reimburses individuals the full value of what it will cost to buy new personal possessions and repair the home to its pre-damage condition. The policies are more expensive in terms of monthly premiums.
People living in Florida will also be subject to a number of exclusions due to the high potential for hurricanes and tornadoes. Because the insurance company will be paying major reimbursements in this type of policy, insurers will want extensive documentation of personal possessions and the home.
Know the Coverage
Individuals need to examine their policy carefully to determine what type of coverage they have. For those with an actual cash value policy that feel they’ve been short changed, it can be beneficial to engage the services of a public adjuster. The professionals have the ability to negotiate on behalf of their clients or even have a claim reopened for a better settlement.