Actual Cash Value
The term, Actual Cash Value, is universally used by insurance providers to denote the specific amount of money necessary for replacement or compensation for something that was insured. Circumstances include the insured item being stolen, damaged with no possibility of repair or replacement with something with similar quality, and lost.
Insurance companies are obliged to present the owner of the policy with payment for the insured item. The actual cash value of the must be returned during a loss. In most cases, insurers prefer to insure items in this manner. However, policy holders or policy applicants must be aware of certain limitations to the coverage pertaining to actual cash value. Individuals owning specialty items must be informed of these, if they intend to or have already purchased an insurance policy.
When we talk about actual cash value, the basis for the computation is the price of the item when it was newly purchased less depreciation. For example, if an individual purchased a $15,000 vehicle and crashes it after a few days, in most cases, the insurance companies will most probably pay for the entire face value of the vehicle. This is because the depreciation of the vehicle is reasonably minimal. Then again, if the car is already 10 years old and it crashes, the actual cash value of the vehicle by that time might only be just $1,000. This amount would enable the policy owner to buy another vehicle that holds a similar value to the car which was previously ruined.
An interesting feature of the actual cash value is that it does not take into account the appreciation in value of the insured item. Some valuable assets gain value over time. Items like, jewelry, antiques, houses and classic automobiles often increase in value. In order to make certain that policy owners shall be suitably compensated, a specialty policy must be in order so that payment can be secured in case there is a loss. It can even be more difficult to compute for the actual cash value for unique items. Works of art, like paintings, are quite complicated to calculate for since these objects cannot be compared to other pieces. For these types of items, an Astated Value Policy should be used instead.
Prior to purchasing an actual cash value policy, applicants must discuss the specifics with their respective brokers or agents. Know what your options are before putting down your money. An appropriate inquiry would be to ask what would happen if the insured item were to get lost. Assess the how the insurance representative answers the question until you are satisfied. If not, you might want to survey other insurance providers.
For people who work at home, like stay-at-home moms, their residence also functions as office space. Therefore, in this situation, the loss of a residence equals to the loss of an office and equipment needed for work. On top of that records or documents for work should also be accounted for. It might be a complicated process when you purchase a home insurance policy but, nevertheless, these items must be part of the coverage.