When it comes to auto insurance, you have some basic options, with some of the most common being Actual Cash Value and Replacement Cost. In today’s post, we discuss the differences between these two types of auto insurance policies to help you make an informed decision.
What Is Actual Cash Value Auto Insurance?
Actual Cash Value (ACV) is a type of auto insurance that pays to repair or replace your car according to the value of your vehicle at the moment of the loss.
As you know, cars start losing value the second you drive it off the lot. Day by day, your car becomes less valuable. What ACV auto insurance does is to calculate how much your car was worth when a covered incident happened and pays you a sum that reflects that value.
But how do insurance companies know how much your vehicle is worth at a certain point in time?
Most insurers rely on third-party organizations that try to determine as accurately as possible the current value of your vehicle by looking at factors like:
- Model
- Make
- Mileage
- Age of your car
What Is Replacement Cost Auto Insurance?
Another common type of auto insurance policy is Replacement Cost Value (RCV). A Replacement Cost policy does NOT consider depreciation and pays the cost of replacing your car with a brand new one.
Needless to say, Replacement Cost insurance policies almost always cost more than Actual Cash Value. Plus, it’s worth noting that not all insurers offer replacement cost policies and the definition of “replacement cost” may vary between companies.
When it’s available, Replacement Cost policies are particularly useful for high-end cars.
If, for example, the owner of a luxury car is in an accident and has Actual Cash Value insurance, the money the insurance company pays them may not be enough to pay off the remaining loan amount. With Replacement Cost, owners of high-end cars can rest easy knowing they’ll get enough money to settle their loan.
BZ Bee Insurance: Auto Insurance in Texas
Looking for high-quality auto insurance? At BZ Bee, we understand our clients’ needs and go out of our way to help you find coverage that meets your needs.To get a free quote, just contact us by email (ayalamariaeugenia@yahoo.com) or telephone (832-729-8114), or fill out the contact form on this website.
