California led the nation in home insurance claims filed between 2015 and 2019. After the recent wildfires, Palo Alto, CA residents should review their home insurance policy. Understanding replacement cost coverage and actual cash value is crucial right now.

Replacement Cost Coverage

This compensation focuses on replacing damaged belongings with new yet similar items. The replacement is an exact or equivalent brand, design, size, color, shape, and feature. Replacement cost coverage (RCV) is the default for home structure damage and optional for belongings. You pay higher insurance premiums to get it for your belongings, but you pay nothing out of pocket for your insurance claim.

If you choose this route, one of our Allied Brokers Insurance Agency Inc. representatives will send you a check for the current cost of a similar item. You can use that to replace your damaged items. The price could be higher or lower than what you paid initially.

Guaranteed and extended are the two types of replacement cost coverage. Guaranteed coverage pays the full amount to replace damaged homes and belongings. Extended coverage is an add-on policy that covers up to 25% more than the policy limit. It will not cover the entire total, but you pay much less out of pocket.

Actual Cash Value

This compensation focuses on the depreciated value of damaged belongings. You get a check for the item’s current value, not the original cost. Actual cash value (ACV) is the default for belongings and may be an option for home structure damage. Premiums are lower, but you pay more out-of-pocket if you file an insurance claim.

If you choose this route, an appraiser will gather the initial cost, date of purchase, and condition of your damaged belongings. Next, we factor in depreciation and determine the value of your items today. An Allied Brokers Insurance Agency Inc. representative will then send you a check for the depreciated amount. Expect that price to be lower than the initial payment due to wear and tear or product discontinuation.

You must decide whether saving now or saving later is more important. One of our insurance agents will discuss that and more with you. For more information on home insurance compensation, call us or visit our Palo Alto, CA location.