What is replacement cost value?Ī replacement cost value (RCV) policy costs a bit more than an ACV policy, but it’s worth exponentially more to the renter in the case of a catastrophic loss. As a result, it’s important to make sure you have enough renters insurance coverage to provide for replacement of all your items in case of a major loss. With an ACV policy, you might only get reimbursed $400 to replace the sofa, because it has depreciated in value over time. You bought the sofa five years ago for $1,000. Say your apartment catches fire and it destroys your sofa. The same is true for furniture, appliances, and other personal items, including expensive electronic equipment like flat-screen televisions, audio equipment, and computers. When you buy a brand new car, it loses value the minute you drive off the lot. Depreciation is the monetary value that an item loses overtime. That means after a loss, you’ll be reimbursed for the original cost or value of your damaged items, minus depreciation. Some renters insurance policies cover your possessions at their actual cash value (ACV). In the event of fire or other disaster, this coverage is well worth the expense to buy replacement cost renter’s coverage to protect your belongings and their value. But the same theory applies to renter’s insurance. Most often, you see these kinds of insurance policies in conjunction with homeowners’ insurance. That doesn’t even include the cost of the bed. When you add pillows, pillow cases, a bedspread, or comforter, you will easily spend $200 per bed. Each queen-size set will cost you about $40. You probably own at least two sets of sheets for each bed in your house. If you doubt that your material goods have sufficient value to warrant paying premiums on them, take a walk down the aisles of even a discount department store.
This is not the case and to leave yourself uncovered would be a serious mistake. Some renters imagine that their personal possessions will be covered by the building owner’s insurance.
If you live in a rental property, it’s important first, that you carry renter’s insurance, and secondly, that you fully understand the difference between actual cash value insurance and replacement cost insurance.
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