Actual Cash Value Vs Replacement Cost

By: David Keller, CPIA


Did you ever wonder how your insurance policy values your property?  There are two primary methods used to value property.  Actual Cash Value and Replacement cost.

Most items you purchase lose value over time.  You recognize this each time you buy an item from a store.  As soon as you leave that store, that item immediately loses value.   As time goes on, the item continues to lose value until the item has little or no value.  That doesn’t mean that it still is not functional and valuable to you.  It just has no market value.

Insurance companies recognize this value loss.  If your coverage is for actual value only, in event of a loss, your insurance company will only pay for the depreciated value of an item.  That payment will not provide the funds to replace the item with an equivalent item in today’s market.

Many insurance companies, however, offer an option to provide you the funds to replace an insured item that is lost or destroyed with an equivalent item at today’s cost.  This option is commonly referred to as Replacement cost.

Each individual should evaluate their situation to choose the best option for their protection.


Understanding how your insurance policy values your property is critical.  Talk with a Keller National agent today. Contact us at 216-965-0646 or simply, Request a Quote.

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