If you have sustained damage to your residential or commercial property, as a property insurance policyholder, you will need to understand the term depreciation and what it means for your insurance claim and appraisal.
Whether you have incurred water damage, mold damage, storm or hurricane damage, fire damage, structural damage, cast iron pipe failure, or damage due to environmental disaster, your goal as a policyholder should be to make sure you get the payout to which you are entitled to ensure your property can be brought back to its pre-loss condition. This means reviewing your insurance claim with a property damage attorney so that you can gain a better sense of what you are owed, as well as any bad faith insurance tactics the insurance company will use against you.
This article will outline the terms Actual Cash Value (ACV), Replacement Cost Value (RCV), and depreciation so that you can navigate through your property insurance claim with much greater ease.
Replacement Cost Value (RCV)
Replacement Cost Value coverage is a type of property insurance policy that guarantees that a policyholder will receive the full amount needed to replace covered damaged items with “like” kind or quality. In other words, RCV covers the original value of the lost or damaged property.
However, just because the insurance company guarantees covering the value of replacing the damaged item to its pre-loss condition, this does not mean they cannot act in bad faith by using the “like kind or quality” clause against you. For example, suppose you have sustained damage to your tile flooring. In that case, the insurance company may use inflation and rising construction costs as an excuse to argue for a lower replacement cost value.
Similarly, if only a portion of your flooring was damaged, the replacement costs will not cover the value of replacing the continuous flooring. This will surely be an issue if a material of like kind is no longer available in the market.
Actual Cash Value (ACV)
The term Actual Cash Value refers to the amount a lost or damaged property was worth upon the time of loss/damage. The insurance company arrives at this amount by subtracting the depreciation sustained by the damaged item from the replacement cost. Depreciation is, therefore, the loss in value according to market value, plus any wear or tear the property would have experienced while in your possession.
If, for example, your 10-year old roof was severely damaged in a windstorm, your ACV coverage will account for the age and condition of the roof before damage and subtract the value of that depreciation from the value of your roof at pre-loss condition.
Your insurance company is likely to use tactics to convince you that you deserve a lower payout than the one you are entitled to. One common way insurance companies give a policyholder the run-around is by exaggerating the value of depreciation. The insurer may also use a policyholder’s lack of regular property inspection records to claim that the damaged property was in poor condition, thereby bumping up the depreciation value.
ACV policies, which take into consideration deprecation will typically have lower premiums than RCV policies, and for good reason: they provide less in compensation when a claim is made. Under a RCV you are in better position to receive a higher payout to reflect your current damage. As such, RCV, by a wide margin, is the better choice. Yes, an RCV policy is more costly — the exact difference depends on a variety of factors specific to each provider. But if you are looking to save money, ACV is still a good policy and will offer plenty of coverage.
Consumer Law Office – Handling Property Insurance Claims From Start to Settlement
Whether your property insurance policy covers ACV or RCV, you will want to have a property damage attorney review your insurance claim for you. Property insurance and restoration experts can help you understand the fine details of your insurance claim and prepare you for any insurer bad faith tactics that will likely be used against you.
If a dispute arises under your insurance policy, the Florida Property Damage Attorneys at the Consumer Law Office can help you with your dispute so that you can receive the compensation that you are entitled to under your insurance policy.
At CLO, we will take the time to review and interpret your policy to understand the full measure of damages available to you. We work with construction experts, restoration professionals, and others to determine the facts and will aggressively advocate on your behalf to get you the payment you are entitled to.
Contact us today for a free consultation and policy review. Don’t worry – experienced and aggressive Property Damage Attorneys at CLO are on your side!
