Home Value
Request a copy of your entire original policy. This will provide all the details of what is and is not included.
What is the Replacement Cost Value (RCV) of your home?
-
The RCV is what it would cost to repair or replace your home with something similar. This is typically more than the Actual Cost Value (ACV).
-
RCV is the maximum you can recover from insurance, less your deductible, for your home.
-
Insurance bases the replacement RCV on information the homeowner has provided as well as on market comparisons. The maximum values are stated in the policy. Factors include the types of flooring, siding, countertops, roof, and customization.
What is the Actual Cash Value (ACV) of your home?
-
The ACV of your home is the RCV, minus the depreciation.
-
If you do not make repairs, the ACV is the maximum you can receive from insurance, less the deductible.
ACV vs RCV Figure
In this illustration, the RCV used is a maximum for the home of $450,000. Depreciation is $75,000 and the ACV is $375,000.
What is other property?
Other property consists of structures and improvements that are not attached to your home, such as fencing, driveway, mailbox, shed, swimming pool, and landscaping. Typically, other property coverage is a percentage of the home value.
If your deck is attached to your home, it is part of the homeowners policy. If it is freestanding, it is other property.
If you have a detached building that is valued at more than the other property coverage, like a detached two-car garage/shop, it will only be covered up to other property value, unless you have a separate policy for it.
What is personal property?
Personal property is anything that can be moved in the home or on the property or is attached to the home.
-
Furniture
-
Clothes
-
Curtains
-
Lawnmower
-
Flag
What is the deductible?Â
It is the amount you must pay prior to insurance paying for a claim. Usually, it is several thousand dollars. The deductible applies to everything covered under your homeowners policy: home, other property, and personal property.
-
Earthquakes. Earthquake insurance is almost always a rider to the policy. If you do not have an earthquake rider, you probably are not covered. The deductible is typically 10% to 20% of the RCV.
-
Wind and water damage. If you live in an Atlantic or Gulf Coast state or in Hawaii, you likely have a separate deductible for wind and water damage. The deductible may apply once per year, or it could apply once for each storm.
-
Wildfires. Some insurers are starting to require separate deductibles for wildfires.
What is depreciation?
-
Depreciation is the decrease in value over time due to age, obsolescence, and wear and tear. Generally, depreciation is calculated by dividing the RCV by its life expectancy, minus the age.
For example: You bought a lawn mower for $1000, it is four years old, and the life expectancy is ten years.
$1000 / (10-4) = $600
The depreciated value is $600.
-
If you have RCV coverage for your home and personal property, you will receive reimbursement for the depreciation once you repair and/or replace the damaged or destroyed items. Insurance companies typically require proof of the repairs for larger claims.
-
You may not be able to recoup the depreciation on other property.