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Actual cash flow vs. replacement cost



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Actual Cash Value vs. Replacement Cost – Do You Know The Difference?

Forty percent of homeowners are not aware of what their home insurance policy really covers and nearly one in five policyholders believe they do not have enough insurance to repair or replace damaged or stolen property, according to a national study conducted in 201

8 in Mercury. Specific confusion area is the difference between "Actual cash value" and "replacement cost."

Why is this important? Think about your 65-in. Smart Ultra
HD TVs are stolen. Should your insurance company give you a settlement to replace
your TV with a new one of a similar kind and quality, or what your TV is right now
worth today after being used? The answer:
It depends on the coverage you chose when you bought your homeowners
insurance policy.

Here is a brief explanation of the difference between the two
cover and how you can get compensation for a covered property loss.

Fact
Cash Value –
When a homeowner has an actual cash value coverage
to repair or replace damaged, stolen or destroyed personal property, their insurance
The company will pay to replace the item with similar kind and quality less age and
conditions depreciation.

"Actual cash value is basically what it is
Sounds like – that's what your personal property is worth at your time
loss, so the cost of repairing or replacing the property with deductions for depreciation, says Mercury
Vice President of Property Requirements Christopher O & # 39; Rourke. depreciation
vary depending on the type, age and condition of the property, but you can rest
sure we do our best to ensure that our customers are properly compensated
so that they can resume their usual lifestyle as soon as possible. "

Insurance Tips: Rourke recommends
homeowners keep an inventory of their belongings, along with copies, scans or
Pictures of your receipts if you have a real cash value policy.

Replacement cost –
When a homeowner purchases compensation coverage, an insurance company will
pay to repair or replace damaged, stolen or destroyed personal property with similar
type and quality at today's prices. The policyholder is able to
recover any amortized depreciation up to the compensation cost once
property is replaced.

So why should you buy replacement cost coverage?

"Chances are you may not be able to find the exact model
of a TV bought two years ago. With replacement cost coverage you will
be able to replace your old TV with a newer model without having to
absorb the cost for two years of use, says Rourke.

Insurance Tips: Rourke recommends that homeowners insurance owners review their coverage with their insurance agents annually.

"Our agents are diligent to explain the ins and outs
of insurance to customers, but homeowners should reach out to theirs
agent to assess their coverage before a loss occurs. A simple phone call could
Stop saving yourself thousands of dollars, especially if you have acquired new ones
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