RCV vs ACV home insurance

Replacement Cost Value (RCV home coverage)

Replacement cost value (RCV) provides compensation for the original cost of an object, instead of providing a fixed cost based on the tangible value of the item. For example, if you totaled your car under an RCV policy, you would be given enough funds to buy a vehicle of a similar make, model, and year. On the other hand, you would not be given enough to buy a vehicle of higher value. 

RCV claims are some of the highest pay-out claims, so they usually have more expensive premiums on their policies.  The reason being, RCV home insurance guarantees that a policyholder will get the entire amount needed to reimburse covered damaged items with a similar replacement of quality. RCV home insurance saves a lot of homeowners from stress and uneasiness about things not going as planned. 

Actual Cash Value (ACV)

Actual cash value (ACV) home insurance typically has lower premiums than RCV policies. This is because this insurance policy provides less coverage when you file a claim. The insurance term “actual cash value” is the cost that a lost object was really worth.  This is a result of deducting any discount the item has supported previous to losses from the price of replacement.

Depreciation is the foundation of ACV claims because an item can lose thousands in value depending on the state it was in before the loss. Typically, Insurers compute depreciation by taking into consideration the duration of the lost item and how much it went through in regards to any damages made throughout your ownership. For example, if your windows have been decades old and in unstable condition, your policy may not cover the anticipated amount it will take to replace these windows. Switching to an RCV policy. If you are needing to be fully covered in your policy, talk to our agents and see how much you can save on our Farmers Insurance RCV home insurance policy. We strive to help our homeowners save hundreds of thousands every year while protecting them the right way.

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