Renters Insurance: ACV or Replacement Costs

There are two common reimbursement methods used by renters insurance companies: Actual Cash Value or ACV and replacement costs. The two offers different benefits and can be suitable for you depending on your needs. Which one is best for your situation? Let’s compare these two calculation methods and see the differences, shall we?

ACV or Actual Cash Value is based on the monetary value of your belongings at the time insurance claim is filed. If you have an LCD TV bought for £1,000 two years ago, for example, you will certainly not get £1,000 of insurance coverage for the TV. Why? Because the actual cash value of your TV when the insurance claim is filed is only £300. However, renters insurance policy using ACV coverage calculation methods are much more affordable. If your belongings are relatively new and of moderate to low value – or have low depreciation rate – then you can safely opt for this type of renters insurance coverage.

Replacement costs-based calculation, on the other hand, doesn’t really look into the actual cash value. The insurance coverage mainly focuses on getting you a perfect replacement for the items lost, or a replacement of the same value and quality. If your high-end LCD TV purchased two years ago got destroyed in a disaster, for example, you will get another LCD TV of the same quality as replacement. The cost of renters insurance using replacement costs as calculation base is indeed higher, but this type of renters insurance policy is perfect if you want to enjoy total replacement.