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How Does an Actual Cash Value Insurance Policy Work?


This is Derek from Clark Carroll Insurance Agency, and this video is going to talk about actual cash value policies and what that means, how they're used and when it might be a good option for you when you're purchasing an insurance policy What is an actual cash value policy? Actual cash value is commonly referred to as ACV, Actual Cash Value

It is a claim settlement process that many insurance companies use it is not the preferred one A preferred method would be replacement cost and we have done a video on what replacement cost is and how you calculate that in the past so I highly suggest watching that Actual cash value is going to do replacement cost minus depreciation so it is a little bit more involved An example of how an actual cash policy would work would be kitchen fire for example If your fire were to destroy the cabinets in your home and your cabinets were 20 years old the insurance company wouldn't that pay for you to put in brand new kitchen cabinets they're going to pay out what 20-year old cabinets are worth So if you have an actual cash value policy you're probably not going to get new kitchen cabinets after a fire

Another example of when actual cash value is commonly used would be on a roof even if you have replacement cost on your home several insurance companies have gone to actual cash value on roofs that are over a certain age, and what that's going to do is again it's gonna pay you replacement cost minus depreciation So if there's a windstorm or a hailstorm you may not be getting a brand new roof even though you do have replacement cost on your policy you'll commonly see actual cash value policies on personal property and commercial property The benefits of an actual cash value policy is that it does help keep your premiums lower because the claim settlements are going to be reduced by the depreciation if you have any questions on how an actual cash value policy works give our agency a call Clark Carroll Insurance Agency 815-244-1570

Source: Youtube

How Does an Actual Cash Value Insurance Policy Work?

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