INDUSTRY INSIGHT
INSURANCE
SPONSORED CONTENT
IS YOUR PROPERTY
OVER-INSURED?
“But I would never be able to sell my building for the
amount it’s insured for!”
F
rom both homeowners and commercial property owners, we in the
insurance industry hear this complaint a lot. And, admittedly, the policy
your insurance carrier sent you probably doesn’t do much to clarify
where the limits listed came from.
So, let’s break it down.
There are essentially two types of property coverage: Replacement Cost
and Actual Cash Value. Knowing which one you have (and what these terms
mean) could save you a ton of hassle in the event of a claim.
The less expensive of the two options,
Actual Cash Value (or ACV), covers
your property at a rate that factors in
depreciation. As a piece of property gets
older, its value goes down. So if an accident
were to destroy that property, the amount your insurance carrier would give
you to settle that claim lessens with time.
ACV for building coverage is rare, but it is how most carriers cover your
contents. Televisions, golf clubs, computers, etc. – in the event of a claim, these
are all typically valued according to how much it would take to replace them
with contents of similar kind and quality, minus depreciation.
Needless to say, covering your home or business property itself on such a
basis might save you money now in premium payments, but it could end up
costing you a lot more if something unfortunate happens.
Why?
Well, let’