Replacement cost vs. actual cash value insurance-which is right for you?

There are numerous home insurance and auto insurance options available to you in Edmonton today. But before you call for home or auto insurance quotes, take a little time to brush up on your terminology—it might save you money down the road.

Two of the most important concepts you should understand when requesting home and car insurance quotes in Edmonton are “replacement cost” and “actual cash value.”

Let’s take a look at these two types of coverage, and how they can affect your bottom line and your peace of mind.

Replacement cost coverage (RC)
In a nutshell, a replacement cost insurance policy will cover the full cost to replace an item with a new product, similar in kind and quality, if it has been damaged beyond repair or stolen. You don’t lose money because of depreciation.

Actual cash value (ACV)
ACV coverage differs from RC coverage in that the amount you will receive in the event of loss or damage of property is adjusted according to the condition of the item on the day of the incident. In other words, the amount of money you will receive will be equal to what it would cost you to replace the item with another one of similar age and condition.

Let’s imagine, for example, a pipe bursts in your basement den and destroys the TV you paid $1200 for five years ago. If you opted for RC coverage when you got your Home insurance quote in Edmonton, your insurer will research the replacement value of a similar TV and replace with a brand new model of similar like, kind and quality even if it costs more than the original $1200 purchase price. If you opted for ACV coverage when you got your home and car insurance quotes in Edmonton, your insurer will research the value of similar TVs and pay you the depreciated value.

If your claim is auto related and your vehicle qualifies, there is a coverage available similar to RC called waiver of depreciation. Let’s say you’re driving home in your pickup truck on a winter evening and you get sideswiped at an intersection. You’re fine, but your insurance company determines the damage to your truck would be too expensive to fix. If you qualified and opted for waiver of depreciation coverage when you got your auto insurance quotes in Edmonton, your policy will pay you the full amount to replace it with a new truck of the similar value.

Do you have any questions about replacement cost or actual cash value? Contact us at Drayden Insurance. We’re delighted to help you in any way we can with your insurance needs—we’ve been doing it since 1965!

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