When it comes to claim settlements, there are two ways that insurance companies can determine how much they will pay out; replacement cash value and actual cash value.
Understanding your policy and how each type of valuation works is critical to getting a fair settlement from your insurance company. That's why we're here to help break it down for you in this blog.
Of course, you don't need to understand all the ins and outs of your insurance policy to get a good settlement - you could just call Liberty Adjusters. Our public adjusters work for you – not the insurance company. Being on your side helps to get up to 574% more for the needed repairs.
What is Actual Cash Value (ACV)?
Actual cash value is the most common way that insurance companies determine payouts for claims. ACV takes into account the depreciation of your damaged property. So, if your home was built in 1950 and suffered water damage, the insurance company would send out one of their adjusters to determine the cost to replace your home with one of similar size, quality, and age.
However, they would then subtract the depreciation from that amount. So, if it would cost $500,000 to replace your home, but the adjuster determines it has depreciated by $50,000 based on the age or condition, you would only receive a settlement for $450,000.
As you can imagine, many people don't have the funds available to make up for the large difference in their settlement and are left with a serious loss.
What is Replacement Cost Value (RCV)?
Unlike actual cash value, replacement cost value does not depreciate your property's value. This type of valuation is much more favorable to the policyholder as it ensures that they have the full amount needed to repair or replace their property, which should always be the case anyways.
However, not all policies are created equal. Some insurance companies will only pay out the replacement cost value if you have purchased that type of coverage. Otherwise, they will default to using actual cash value.
Why It Matters for Your Insurance Claim
This is why it is extremely important to read your insurance policy carefully and learn which type of coverage you have. Not sure how to find it? Don't feel bad, the insurance makes their policies complicated by design. Give us a call at Liberty Adjusters, we're more than happy to walk you through your policy, and make sure you have the coverage you need before a significant loss occurs.
Our public adjusters will fight for you to get the best possible settlement for your claim, regardless of which type of valuation your insurance company is using. Get in touch to submit a claim today!