Written by Nicholas

March 11, 2022

What is Actual Cash Value Coverage in a Homeowners’ Insurance Policy?

If a fire or hurricane has severely damaged your home and its contents, you will file a claim with your home insurance company for the covered loss. If you have never had to file a claim before, you may assume your insurer will pay the full cost of replacing or repairing your damaged home and personal items. However, you are about to learn what is actual cash value coverage in a homeowners’ insurance policy and what it means.

Actual Cash Value vs. Replacement Cost

Your homeowners’ insurance protects the structure of your home (dwelling coverage) and its contents (personal property coverage). Therefore, if a covered peril, such as a fire or a hailstorm, damages your property, your insurance company will pay the cost to replace or repair your damaged property. 

However, how much they will pay depends on whether you have actual cash value coverage or replacement cost coverage. 

Actual cash value (ACV) coverage will pay you the current value to replace damaged or stolen property. For instance, a fire could have destroyed your refrigerator. You purchased that refrigerator five years ago for $800. But today that five-year-old refrigerator is only worth $400. Consequently, your insurer will only offer to pay you $400 for a new refrigerator.

The insurance company determines actual cash value by deducting for depreciation in the value of an item, wear and tear, etc. 

On the other hand, if you have replacement cost value coverage, the insurance company will pay an amount to cover the cost of purchasing a similar refrigerator of like quality. 

In most homeowners’ policies, dwelling coverage also provides replacement cost coverage to repair or replace damage to the structure of the house. For instance, a storm damages your 15- year-old roof, you will get a new roof (or section of a roof).

Conversely, most policies only provide actual cash value coverage for damaged personal belongings. 

Of course, if a homeowner wanted replacement cost coverage for his personal property, he could get it-at a price. He can contact his insurance agent to get that coverage added to his homeowners’’ policy, but his premium payment will go up. Therefore, it’s as if you wanted to get $100,000 more life insurance coverage. You can do it, but you will have to pay for it.  

How Will You Get Paid If You Have Replacement Cost Coverage

Typically, the insurance company will make the replacement cost payment in two stages. First, they will make a payment equal to the actual cash value of the damaged property.

Next, the insured purchases the replacement items or repair the damaged property. 

Once the item has been replaced, or the damage repaired, the homeowner sends the insurer a copy of the receipt for the new item or the repair bill. Then the insurer will send a second check, representing the depreciation, to the homeowner. 

The insurance companies use this two-step payment process to make sure the homeowner actually goes purchases the replacement item and/or makes the repairs to the damaged property. 

Indeed, insurers offer replacement cost coverage to homeowners for personal property. But, again, the homeowner will have to pay for it. 

If You Need a Public Adjuster, Call AllCity Adjusting

We are a family-owned claims company with five decades of combined adjusting experience. If there’s one thing we understand, it’s that you need 100% of your claim value.

Insurance companies undervalue your claim 8 out of 10 times. Additionally, they hire expensive claims adjusters to ensure they maintain a strong profit margin. Moreover, they have experienced actuaries that help their team of agents challenge your insurance claim’s validity and value.

You have already gone through a tumultuous event. Therefore, get an agency that gets you more during the claims process.

Replacement Cost vs. Actual Cash Value

Whether your policy provides you with actual cash value or replacement cost value coverage, we work to ensure you get 100% of your claim value. With over 50 years of combined adjusting experience, we know insurance companies and understand where they cut corners. As a result, we help you build a larger claim, maximize your claim value, and get you back to normal fast.

Don’t get fooled, get the company that gets you more. Call us today at 844.692.3587 or visit our website to find an office near you.


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At AllCity Adjusting we help residential and commercial clients alike get the claims support they need. Moreover, we have over 50 years of combined experience helping get our clients the max settlement time and time again. If your claim has been low balled or denied entirely we can help increase your maximum settlement. Call us today for a FREE consultation. Experience the AllCity difference.

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Salvageable v. Non-Salvageable Property After a Fire

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Many homeowners never read their homeowners’ insurance policy. Then a covered loss, like a fire or hurricane, causes extensive damage to the home and contents. Of course, the homeowner files a claim with her insurance company. Eventually, the homeowner gets a claim settlement offer from the home insurance company. However, only then does the homeowner learn the difference between actual cash value v. replacement cost value coverage.

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