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ACV Insurance

What the Heck is ACV Insurance

When an insurance agent starts talking in terms that you don't understand or abbreviates things that you don't have a chance to ask about, you could end up in a heap of trouble. Oh, and, that heap might just be the missing pile of money due the wrong type of insurance coverage.

When you hear ACV, you might ask what that stands for. The answer: Actual Cash Value.

"Actual Cash Value" can be described as the current value of an item (property or home). This current value will consider the following factors:

  1. The age of the item
  2. The condition of the item

An insurance company will define actual cash value as the cost to replace an item with new property of like kind and quality, less depreciation. There can be additional factors to consider such as obsolescence. If an item is obsolete, is there any value? Some would argue no. Others would argue yes. I make the case for yes since there are items that were made obsolete that are now worth many times what they once were.

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When you are shopping for insurance coverage, you will generally not want to carry insurance that covers you on an ACV (actual cash value) basis. The alternative coverage is call Replacement Cost coverage and will provide coverage that will replace an item with one of like kind and quality without considering age or depreciation.

Remember, when deciding between ACV or Replacement Cost, choose Replacement Cost Coverage.