Replacement Cost Valuation (RCV) Clause Compensation for Damaged Property

B.

RCV is the maximum amount your insurance company will pay you for damage to covered property before deducting for depreciation.

The RCV payment is based on the current cost to replace your property with new, identical or comparable property.

The other choices were detractor: Application and definition of the insurance terms Replacement Cost Value (RCV), Actual Cash Value (ACV) and depreciation can be confusing.

Its important that you understand the terms to help settle your claim fairly.

An easy way to understand RCV and ACV is to think in terms of "new" and "used." Replacement cost is the item's current price, new.

"What will it cost when I replace it?" Actual cash is the item's used price, old.

"How much money is it worth since I used it for five years?" Hold Back - Most policies only pay the Actual Cash Value upfront, and then they pay you the "held back" depreciation after you incur the expense to repair or replace your personal property items.

NOTE: You must remember to send documentation to the insurance company proving youve incurred the additional expense you will be reimbursed.

Actual Cash Value (ACV) ACV is the amount your insurance company will pay you for damage to covered property after deducting for depreciation.

ACV is the replacement cost of a new item, minus depreciation.

If stated as a simple equation, ACV could be defined as follows: ACV=RCV-Depreciation Unfortunately, ACV is not always as easy to agree upon as a simple math equation.

The ACV can also be calculated as the price a willing buyer would pay for your used item.

Depreciation - Depreciation (sometimes called "hold back") is defined as the "loss in value from all causes, including age, and wear and tear." Although the definition seems to be clear, in our experience, value" as a real-world application is clearly subjective and varies widely.

We have seen the same adjuster apply NO depreciation (100 percent value) on one claim and 40 percent depreciation almost half value) on an almost identical claim.

This shows that the process of applying depreciation is subjective and clearly negotiable.

Excessive Depreciation - When the insurance company depreciates more than they should, it is called "Excessive depreciation." Although not ethical, it is very common.

Note any items that have excessive depreciation and write a letter to your insurance company.

References: http://carehelp.org/downloads/category/1-insurance-handouts.html?download=17%3Ahandout08-rcv-and-acv and http://www.schirickinsurance.com/resources/value2005.pdf and TIPTON, Harold.

F.

& KRAUSE, MICKI, information Security Management Handbook, 4th Edition, Volume 1 Property Insurance overview, Page 587.

If your property insurance has a Replacement Cost Valuation (RCV) clause, the damaged property will be compensated based on a new, comparable or identical item for the old one, regardless of the condition of the lost item.

This means that if you have a RCV clause in your property insurance policy, your damaged property will be replaced with a new item of similar quality, brand, and model to the one that was damaged, regardless of the condition of the lost item. This can be beneficial for the insured as it allows them to replace their lost item with a new one without having to pay out of pocket for the difference between the old and new item's value.

In contrast, if your property insurance policy has an Actual Cash Value (ACV) clause, your damaged property will be compensated based on the value of the item on the date of loss, which takes into account the depreciation of the item over time. Therefore, if you have a RCV clause, you may receive a higher compensation amount than if you had an ACV clause.

It's important to note that a RCV clause may come with additional costs, as it typically results in higher insurance premiums due to the increased coverage provided. Therefore, it's important to carefully consider the costs and benefits of a RCV clause when selecting an insurance policy.