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Cronin Insurance Agency
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What is the difference between Actual Cash Value (ACV) and Replacement Cost (RC)?

Both these terms refer to the way a Home Insurance company will pay a claim. Did you ever wonder what Actual Cash Value means and how it will affect the payment of your claim? Is it better or worse having Replacement Cost on your policy? Does it impact the price you pay for home insurance? We're going to answer those questions in this blog. Let's start with damage to Personal Property.

As an example of a personal property loss, let's say that a bunch of kids broke into your home while you were on vacation. For no reason at all, they decide to spray paint your leather couch. This couch costs you $3000 when you purchased it 3 years ago. You can't repair it. The couch is a total loss.

What is Replacement Cost on a Home Insurance policy?

Replacement Cost pays you the cost to replace your property today without depreciation. For example, you place a claim with your insurance company for the damage couch mentioned earlier. A similar couch today costs $3250. The Insurance Company checks your policy. They confirm that you have Replacement Cost on your Contents (RCC). They send you a check for $3250 minus your deductible.

What is Actual Cash Value on a Home Insurance Policy?

Actual Cash Value pays you the cost of replacing your property minus depreciation. For example, You place this same claim with your insurance company. They check your policy and determine you have Actual Cash Value (ACV) on your contents. They use a formula to determine that your 3 year old couch is worth $2000 today. They send you a check for $2000 minus your deductible.

How does ACV and RC affect what I pay for Insurance?

As you might imagine, you'll pay more for Replacement Cost than Actual Cash Value. How much? It depends on how much Property you insure. It can range from a hundred dollars a year up to a thousand or more for a larger home. Many of our customers choose ACV to make their policy more affordable, however we always recommend you get Replacement Cost on your policy. We've shown how depreciation affects your claim payment for a single leather couch. Imagine what it would do to an entire household full of personal property?!

Does ACV and RC affect the Building Coverage on my Policy?

Yes, ACV and RC work the same way with Building coverage on a Home policy. But most modern Home Insurance policies come with Replacement Cost included for buildings. Some landlord policies (DP) and Commercial policies still offer ACV. But these are the exception, not the rule. It's always best to check with your agent.

Which is better: Actual Cash Value or Replacement Cost?

Replacement Cost is always better coverage, but costs a little more. If you're trying to make your policy more affordable, opt for Actual Cash Value, but keep in mind that these savings might cost you at claim time.
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Personal liability covers you for bodily injury or property damage to others, that arise on your residence or through the personal activities of you and your family.

For example, if someone slips and falls on your property, or your child hits a ball through a neighbor's window and breaks an expensive item,

Personal Liability can pay for your defense and damages to the other party. Home policies provide a minimum of $100,000 with higher limits available. Always buy as much as you can afford as higher limits are available and are inexpensive

Medical Payments can pay necessary medical expenses for guests who are accidentally injured on your property. This is regardless of whether or not you are legally responsible. It also can provide coverage in other situations as well. The minimum amount of coverage available is $1,000 per person. Like Personal Liability, we recommend you buy as much as you can afford.

For more information on Personal Liability or Medical Payments, contact us and we will be happy to help you.

Cronin Insurance, the Wise Choice.
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What is Loss of Use on a Home Insurance Policy?

Loss of Use also called Additional Living Expense pays the necessary increase in living expenses required to maintain your family's current standard of living while your house is being repaired due to a Covered Loss.

Examples of Loss of Use would be

the cost of hotels or temporary apartments,
food bills in excess of your normal grocery and restaurant bills,
cooking supplies and
the cost of moving property into storage.
On most policies, Loss of Use will be limited to 10-20% of the Dwelling coverage. For example, if you have $150,000 in Dwelling coverage, 10% would limit you to $15,000 of Loss of Use for an entire year! For a condo, you get 40% of Personal Property coverage, so $30,000 of Personal Property would yield only $12,000 in Loss of Use.

Another variable to keep in mind is how long repairs may take. If your repairs last more than 3 months, you might not want to rent rooms at the Ritz or have your meals at expensive restaurants, so plan accordingly.

If you are renting to tenants, Loss of Use can be used to replace lost rent, double check your policy or contact your Agent if you are unsure.

If your home suffers a loss that makes it uninhabitable, rest assured that the Loss of Use coverage in your Home policy can help you when you need it most.

For more information, please contact us and we will be happy to help you.

Cronin Insurance, the Wise Choice.
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What is Other Structures coverage on a Home Insurance policy?
Stay tuned to find out.

Other structures coverage on a Home Insurance policy refers to those permanent items that are not attached to the Main House. Items like Fences, Trellises, Sheds, Gazebos and free standing Garages are considered Other Structures.

A special caution should be noted here about Other Structures coverage. Most companies consider pool patios and pool cages as Dwelling coverage because they are usually attached to the main house by poured concrete patios. But some companies consider pools as Other Structures, so you need to make sure you have enough Other Structures coverage to rebuild these items. Other Structures coverage is usually offered at 1, 2, 5 or 10% of your Dwelling coverage, but you can go higher if you need to cover pools or free standing garages.

For more information, please contact us and we will be happy to help you.

Cronin Insurance, the Wise Choice.
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Dwelling, also known as Building, Coverage, covers the roof, walls, and floors of your home. It also covers your porches and patios as well as fixtures such as built-in appliances, plumbing, heating, permanently installed air conditioning systems, and electrical wiring.

For condos, a Master Association Policy will cover the outside, but not the interior of your unit. A Condo Unit-Owners policy will cover cabinets, wall-to-wall flooring, custom build-outs, permanent fixtures and in many cases, the air conditioning unit.

How much Dwelling coverage should you buy?

We recommend 100% of the replacement cost estimated to rebuild your home. At Cronin Insurance, we use Replacement Cost Calculators, unique to each company, to set your Dwelling coverage.

For more information, please contact us and we will be happy to help you.

Cronin Insurance, the Wise Choice.
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