What is actual cash value on renters insurance? My renters insurance policy talks about actual cash value, and there’s also an endorsement for replacement cost on the declarations page. What does any of that mean?
Great question! Let’s dive in…
What Is Actual Cash Value On Renters Insurance?
What is actual cash value coverage on renters insurance, and why is it such a frightening concept? How can you protect yourself from the terrible situation this coverage could leave you in?
Actual Cash Value
Actual Cash Value, or ACV, is exactly what it sounds like. It’s the amount of money that your personal property is actually worth today. You paid a certain amount of money for that personal property when you bought it some time back. With each passing year, it depreciates in value. The actual cash value is the cost of the item minus depreciation.
That couch you bought last year? Actual cash value gets you maybe half the money you need to replace it. Your tablet? Probably even less, since there’s a new model or two that’s come out since you bought it.
Why Is My Renters Insurance Policy Written With Actual Cash Value?
Your renters insurance policy is written with actual cash value because that’s the base default coverage. When the standard insurance policy form is developed, it’s written in such a way that the coverage can be expanded with endorsements, but provides bare minimum coverage from the policy form itself.
That doesn’t necessarily mean that your policy only provides actual cash value. If you have an endorsement for replacement cost on your policy, the endorsement is incorporated into and made a part of the policy. At that point, it amends the definitions, terms, and conditions as described in the endorsement itself.
What Is The Replacement Cost Endorsement?
The replacement cost endorsement modifies your policy so that personal property losses are settled at the cost to replace the item with one of like kind and quality. This means that the amount of money should be sufficient to go buy a new item rather than receiving the depreciated value. Replacement cost coverage is superior in every way to actual cash value coverage. The difference in a loss settlement might me as high as 90% in some situations!
To find out more about actual cash value, replacement cost, or renters insurance in general, call Effective Coverage!