When it comes to compensating Calgary home insurance policy holders for their losses, insurers will use one of two options: “actual cash value” (ACV) or “replacement cost” (RC) coverage. Your existing insurance policy will specify which of these two options applies to your coverage, but if your policy is up for renewal, or if you’re thinking about updating your coverage, you should review these items as part of your re-evaluation.
Experts recommend that you audit your insurance coverage annually to make sure you have the right kind of protection. If you’ve acquired new assets, your current policy may not completely cover them; if you’ve divested yourself of assets, you may be paying for protection you no longer need. First, though, you should familiarize yourself with some important terms you’ll encounter during your insurance review.
Actual Cash Value, Replacement Cost and Other Important Terms You Should Know for Your Calgary Home Insurance
Before you alter your Calgary home insurance policy or switch to a totally different kind of protection, you need to understand some key definitions as used in your policy.
Actual cash value refers to the current market value of items in your home. It is calculated by taking the item’s original purchase price, then factoring in any subsequent appreciation or depreciation.
Replacement cost differs from ACV in that it reflects the amount of money you would have to spend to replace a damaged or stolen item. Thus, depreciation does not factor in, but appreciation does.
Guaranteed replacement cost is a specialized type of coverage that ensures that your insurance provider will cover all costs associated with restoring lost or damaged property, even if the value of that property exceeds your policy’s coverage limit.
Special limits are added protections for specific items, which are covered separately under your policy. For example, if you own a rare artwork that is worth more than your coverage limit, you will have to insure it under a “special limit” add-on. Otherwise, you risk being left to absorb the difference between its value and your policy limit out of pocket.
Calgary Home Insurance: Actual Cash Value vs. Replacement Cost Coverage
There are several important factors to consider when choosing between actual cash value (ACV) and replacement cost (RC) coverage. First, ACV coverage is more affordable, typically costing 10 to 20 per cent less than a comparable replacement cost policy. However, replacement cost policies offer more comprehensive protection, and are recommended if you have valuables worth a considerable amount of money.
To determine which kind of coverage offers you the best protection for the best possible price, you should create a comprehensive list of the valuables in your home. Track their purchase prices, current cash values and replacement costs. Imagine that the most valuable items on the list were destroyed or stolen. What would you get from your insurance company for their actual cash value? Is there a large discrepancy between this and the replacement cost? If so, the latter may be a better option.
Other Important Considerations when Choosing or Updating Your Calgary Home Insurance Coverage
You should also keep in mind that ACV and replacement cost coverage isn’t necessarily limited to the possessions in your home; it can also apply to the home itself. Viewed in this light, it’s especially important to make a careful evaluation of your situation and your needs, especially if you live in Alberta’s flood zone.
With Calgary home insurance rates on the rise, homeowners need to go the extra mile when doing their due diligence. Remember: saving a little money on your premiums won’t be worth it if you suffer serious losses in a worst-case scenario and don’t have enough coverage to bail you out.
Calgary Home Insurance: Discover the Lane’s Insurance Edge
The friendly, knowledgeable experts at Lane’s Insurance are happy to discuss the differences between ACV and replacement cost coverage with you, and help you choose the right policy for your unique needs. If you have any questions about Calgary home insurance, please don’t hesitate to contact a Lane’s Insurance customer service representative.
Lane’s also offers fast, free, no-obligation online home insurance quotes. Visit Lane’s today for yours, and remember that you can save as much as 20 per cent on your insurance costs by choosing a home and auto insurance bundle.
