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ArticlesACV vs. RC vs. GRC +
My vacation trailer and boat are insured for $10,000 each. If they burn or are stolen, I’ll get a new one, right?
MAYBE – but don’t count on it. A lot depends on what coverage you carry. First look at whether you have all risk or named perils coverage (more on this in another column).
There is a huge difference between RC (Replacement Cost), GRC (Guaranteed Replacement Cost) and ACV (Actual Cash Value).
When you expect a payout based on one, and your policy wordings are another, it can be devastating.
For RC you insure to the price it would cost to get the same quality NEW. After a loss the insurance company will repair, or replace with one of the same kind and quality new. The maximum they pay is the amount of insurance purchased.
With GRC the insurer agrees to replace the unit with a brand new one of like kind and quality, even if it costs them more, as long as you follow their rules on what value to insure it to.
ACV covers to what it would cost to replace the item with like kind and quality, less adjustments for wear and tear, depreciation, natural life expectancy, etc. If your policy is based on ACV you should adjust coverage limits every few years so you don’t pay for coverage you’ll never have paid out.
For example, if your 2001 24’ Travel Trailer is insured to RC of $27,000 and it burns, the company will replace it with a new 2008 of the same quality. If the 2008 costs $30,000, RC would pay $27,000. GRC would get you a new one. Period. If you have ACV of $15,000 an adjuster would check prices of 2001, and pay based on that. If they are going for $8,000 that’s all you’ll get.
Talk to your broker to make sure you have the coverage you want and the protection you need.
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