Actual Cash Value (ACV) vs. Replacement Cost Insurance

Richey-Barrett Blog (2)

Small and medium size business (SMB) owners have a multitude of responsibilities and concerns with running their own business. I understand your concerns because I own a business too. And if you own the commercial property your business is in you have (at least) two businesses to worry about.

One of the most important decisions you will make as a business owner is how to adequately insure your property.

We would like to Thank our friends at Central Insurance for this video link to “Actual Cash Value (ACV) vs. Replacement Cost: Which Coverage is Right For You?”, which introduces important information about the differences between ACV (Actual Cash Value) and replacement cost protection.​

The Difference Between Actual Cash Value and Replacement Cost Insurance

Replacement cost covers insurers for the amount it will take to rebuild their business at the same location using the same type of materials. For example, as we see in the video, Sue is able to rebuild her restaurant with one of similar materials and in the same location. However, Sue may choose to rebuild elsewhere.

Bob, on the other hand, has ACV coverage. One method of determining ACV is the cost to rebuild less depreciation. Depreciation is defined as the loss of value in property due to obsolescence, time, and wear and tear. ACV tends to be a less costly coverage option since it is based on the depreciated value of the building and not the cost of reconstructing a new building. The insurance company would pay Bob the ACV and he could use that money to rebuild, purchase property elsewhere, or not rebuild at all.

It is extremely important for you as a business owner to ensure your insurance protection is aligned with your businesses goals and objectives. You have many choices to choose from and an independent insurance agent will take the time to sit down and discuss the pros and cons of your insurance coverage. Each business owner’s situation is unique and your independent insurance agent can provide options that will help guide you in making the best decision for your business.

Every business has different insurance needs and there is no single company that can properly protect every business because of their unique makeup and changing needs. One way you can ensure your business is properly protected is by contacting a Trusted Choice Independent Insurance Agent. An independent insurance agent will perform a free insurance audit to ensure you are properly protected. Independent insurance agents are uniquely positioned to provide you and your business with several insurance options so you can compare the protection of multiple top rated carriers. This freedom will allow you to choose the right protection your business and give you the peace of mind you deserve.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>