Depreciation on insurance payments

In Florida most insurance policies are an the basis of replacement cost not cash value, some homeowners faced with higher premiums have elected to change some or all coverage to cash value (check with your agent). When your property is damaged under replacement  (RCV) you will receive the cost of a replacement item regardless of what the damaged item cost was when you bought it or how old it is. Under cash value (ACV) you will receive the value of the damaged item the day it was damaged.

For example if you had a carpet that you bought 20 years ago that was damaged, it may be well past its life expectancy of 15 years and its cash value is 0.00, a replacement would cost you $2000. under ACV you will get 0.00 and under replacement you will get $2000 even if you may have bought it on sale for a 1,000 20 years ago.

Some policies allow for payments under replacement costs in 2 parts, they will send you payment for the cash value upfront and if and when you replace the item they will pay the balance. This forces owners to purchase replacement as opposed to collecting but never replacing.

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