One question that homeowner’s and renters are likely to face is over the issue of actual cash value and replacement cost coverage. In the state of New Mexico there is a big difference between to the two terms that can mean disaster in the event of a total loss for insurance holders. Here are some things that you need to know about the terms and how they can affect your claim payout.
What Actual Cash Value and Replacement Cost Coverage is all About
Understanding your home policy is the first step to being financially secure. Actual cash value is a term that can mean a major headache for policy owners. Let’s say for a moment that you buy a brand new 50 inch flat screen plasma with all the latest technology added into it. You will easily pay several thousand dollars for the television. Each year the value of the television will decrease much like the value of a car does. This is called depreciation. Five years go by and you have a fire that destroys your new television. So you file a claim and receive a check for $100 instead of the cost to replace the unit. Actual cash value will only pay what the unit is worth not what it will cost to buy a new one.
Replacement cost coverage is the opposite of actual cash value. In the event that you have to file a claim you will receive the value of the television of what it will cost to replace it with a like new version of the unit. If you have any questions about what your policy covers in terms of cash value or replacement cost, then feel free to call an independent agent near you. They can help you determine what your policy covers and they can even make changes to make your policy better for you.