When you first bought that car, you were probably mainly concerned about how it looked and how much you had to pay each month. However, if you want to keep driving your new ride, you need to understand the importance of car insurance. There are a lot of options out there, which is why I decided to make a website about auto insurance policies. As a car enthusiast, I currently own 21 cars, and I could tell you horror stories about people who decided not to worry about insurance. If you want to protect your investment and your personal wealth, auto insurance is something that you need to have. I made this website to teach others about auto insurance, so that you can make a great choice.
When it comes to your insurance company replacing stolen items or items damaged in a fire or flood, you might hear a few different terms thrown around: actual cash value and replacement cost. What exactly is different between these two types of reimbursement and how will this affect what sort of costs you can recoup from your insurance claim? This brief article will serve to help you distinguish between the two and also attempt to bridge a common ground between these two phrases.
On paper at least, a replacement cost is most likely what you desire from an object being stolen from you. Essentially, replacement cost simply refers, in your insurance policy, to the cost of how much the item being replace you costs to replace in today's dollars. In other words, if the item that you are replacing is a DVD player, then you will be award the market retail amount of how much that DVD player costs new today.
Many people prefer to have insurance policies that guarantees replacement cost, as it does not take into account the wear and tear of the item, and you will be able to replace the item in question with a new version of the same make and model that you previously owned.
Actual Cash Value
The form of cost you will receive in reimbursement on most insurance policies will most usually be actual cash value, as this is what insurance companies tend to prefer.
Essentially, the actual cash value refers to cost of the replacement minus however the item has depreciated over the years. This means that if you owned that same DVD player, but it has had a couple of years of use under its belt, the insurance company will not be required to reimburse you the full replacement cost. Rather, they can give you the amount of replacement, minus the normal damage from use that the DVD player had most likely incurred over the course of the past several years.
Although you might think that replacement cost reimbursement is the best option, there are times when it may be beneficial to have a type of insurance policy that guarantees actual cash value rather than the replacement cost.
For example, there might be a case where an item has appreciated in value. In these cases, an insurance company will be required to provide you with the replacement cost plus the added value of which the item has appreciated since you bought it. For example, if you bought a rare comic book in the early 1970s for fifty cents, and it is insured under the auspice of an actual value policy, then you are entitled to the full price that the rare comic book has appreciated rather than just the price the comic book cost when it was first purchased.
These cases are few and far between and since the speculation boom of personal hobbies of the 1980s and 1990s, many insurance companies do not offer actual cash value policies on such collectible items and, in some cases, do not offer insurance policies on such items, en toto.
Both of these methods of reimbursement are similar, but they are definitely not quite the same. In addition to the differences listed here, your individual insurance company may have a number of differences listed on their policy.
The best thing to do in order to parse out the differences over your potential insurance policies is to go over each one with a fine tooth comb with an insurance broker to discover the primary differences between each instance of replacement cost and actual cash value.Share