What is the difference between replacement value and actual cash value?
The amount of money your insurer will pay to you following an insured loss is usually referred to as either Actual Cash Value (ACV) or Replacement Cost. Actual Cash Value is the cost of replacing the property with something of like kind and quality – minus an allowance for depreciation. Replacement cost means you may be able to receive a settlement of your claim without deduction for depreciation, but this requires you to have the property repaired or replaced with like kind and quality. A deductible may apply in either case. It’s important to note that all home insurance policies automatically include “replacement cost” payments for building losses if repair or rebuilding occurs. The settlement can be up to, but not greater than, the amount of insurance stated in the policy. Although you and your insurer may appraise your home thoroughly, there’s still a possibility of underestimating the replacement cost of a building. Guaranteed replacement cost coverage will make up for such a shor
