Replacement Costs vs Actual Cash Value
Insurance coverages can be overwhelming and the terms unfamiliar. Homeowner’s policies give you the option to insure the replacement cost (RC) or actual cash value (ACV) of your house, and you will find those same terms when looking for mobile home insurance. Here is a breakdown of both coverages, and why you need to understand what they mean to be insured adequately.
Actual Cash Value
The main difference between the two types of coverage is depreciation, otherwise known as “wear and tear.” In the event of a loss, ACV takes into account the depreciation of your mobile home and factors it into the insurance equation. For example, a 10-year old mobile home has experienced a partial loss of $10,000, but after depreciation is taken for wear and tear on damaged items that wear out such as 10-year-old floor covering, paint on walls, roof shingles, etc., the payout would be much less. However, since Louisiana is a “policy value state” the policy limit on the structure would be paid for a total loss.
RC is the cost it would take to replace the home with a similar or identical product. If a similar mobile home costs $150,000 to build, the insurance company will pay $150,000 regardless of market value. Depreciation is not taken into account; however, you will still be responsible for your deductible you have chosen, and your payout is subject to policy limits. With a Replacement Cost mobile home policy, the insured is required to carry 100% of the replacement cost of the home. Some policies will pay up to 20% additional should the policy amount not be enough to replace the home with like kind and quality.
If you need help analyzing your current policy, or you have questions about finding the best coverage for your mobile home, give us a call at 225-698-6789. At Darryl Murphy Insurance we work for you to make sure you are adequately insured.