How to Read Your Insurance Policy – ACV and ReplacementJune 09, 2020
While reviewing your insurance policy and declarations page, you may see the term “actual cash value” or its acronym “ACV” listed in reference to the policy or specific items. “Actual cash value” is a loss cost settlement term with a specific definition in your policy. An ACV policy pays for loss to items (if the loss is covered by the policy) based on the value of the item at the time of loss. If your television was destroyed by fire, payment would be based on the age/current value of the television, not what the cost would be for the television as if it was new. The good news is, on most policies, you can purchase a coverage called replacement cost that will pay for an item (such as the television) based on the new value. Dwellings and buildings may also be written for replacement cost if certain requirements are met. On policies where the dwelling or building is covered for actual cash value, you may be able to add replacement cost on the roof, depending on the age and materials of the roof. When a policy has replacement cost added to a dwelling or roof, the actual cash value is paid up front (less the deductible) and once the items have been repaired or replaced, you can receive the additional funds up to the predetermined replacement amount.
If you ever have trouble understanding the specifics of your insurance policy, your agent is a valuable resource for guiding you through the policy forms that are part of your policy. If your policy is with Barton Mutual, we would be happy to assist you in clarifying language when you have questions. Give us a call at 417-843-6265 and fire away!
This information is meant to be a broad overview and should not be the only source you consult for evaluating insurance coverage or purchase. The description of coverages and programs are purposely brief and are subject to specific policy provisions, limitations and exclusions that can only be expressed in the policy itself. For a complete explanation of coverages, please consult one of our licensed agents.