Property Insurance Policies: Actual Cash Value

More than 50% of homeowners do not understand technical terms like “actual cash value” and “replacement cost,” yet they are fundamentals for various insurance policies. Details like those contained on the DEC page of an insurance policy only indicate the maximum the insurance policyholder could probably be paid in case of property damage or loss. Most insurance companies in Miami have at least one insurance lawyer, who is well-versed in matters of insurance. This helps advice their clients appropriately and help them understand the most important clauses of their insurance policies. Your Insurance Attorney is here to help you with your claims. Contact us today!

Actual Cash Value (ACV) and Replacement Cost

Whenever you are insuring a property with an insurance company, it is important that you understand both the outer and inner meaning of these insurance terms. ACV is the depreciated value of any property at the time of loss. The law does not allow you to claim replacement on what you have lost. Instead, it advocates for you to be compensated for the value of the property assuming that it was being sold.

In the past, the meaning of this term has been debated in court, with most courts leaning toward the industrial definition of the term rather than what is accepted by the Internal Revenue Service. The Internal Revenue Service well defines the term as what a buyer would willingly pay a seller for the property in its current condition if neither party were under any duress to see the sale through.

Replacement cost is what an insurance policyholder would be paid to replace the lost items. From this, you can quickly deduce that it is superior to the ACV as it allows the policyholder to return to the same position they were before damage or loss occurred. It provides the policyholder with the money to replace the lost items.

ACV leaves a policyholder in a tough position as they are not able to replace the property lost with a similar one which is new, not without digging into their pockets at least. Replacing items or rebuilding personal property such as homes on ACV leaves a policyholder at a loss compared to another client on a replacement cost settlement. It is, therefore, important to seek the advice of an insurance lawyer before tying yourself to a policy that would mean a loss during replacement of property.


ACV Policies in Florida

The issue of overhead, profit and how to pay for loss had become so contentious in Florida, that the legislature had to step into the fray. Going by provision 2.dof the “Loss Settlement” in the standard HO-3 homeowners’ policy from the Insurance Services Office, the insurer is only supposed to pay ACV for a homeowner’s loss “until repair or actual repair is complete.” Provision 2.e of the same policy allows insured persons to file an initial claim for the ACV of the property loss and then take a maximum of 180 days to decide whether they want to replace the damaged property.


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Getting the details of your insurance policy right is essential when the time comes to make claims. Make sure you differentiate actual cash value from replacement cost since they apply to most insurance policies. Feel free to contact us whenever you need clarification on insurance matters.

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