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 2000 24’ Travel Trailer is insured to RC of
$27,000 and it burns, the company will replace it with a new 2011 of the same
quality. If the 2011 costs $30,000, RC
would pay $27,000. GRC would get you a
new one. If you have ACV of
$15,000 an adjuster would check prices of 2000’s, 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.
