Author Topic: Homeowner's Insurance: RCP or ACV confusion  (Read 1531 times)

NinetyFour

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Homeowner's Insurance: RCP or ACV confusion
« on: August 04, 2016, 09:57:44 AM »
It seems that my current homeowner's policy is a Replacement Cost Policy.  It has "inflation coverage".  The coverage goes up 4% each year.  The premium also goes up each year.

My agent told me that the alternative is an Actual Cost Value policy.

This policy is for the house I currently rent out.  I plan to rent it out for at least the next 5 years.

The house is 118 years old, and is about 720 square feet.

So, which kind of policy should I have:  RCP or ACV?

Thanks in advance!

TheInsuranceMan

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Re: Homeowner's Insurance: RCP or ACV confusion
« Reply #1 on: August 04, 2016, 10:26:32 AM »
It seems that my current homeowner's policy is a Replacement Cost Policy.  It has "inflation coverage".  The coverage goes up 4% each year.  The premium also goes up each year.

My agent told me that the alternative is an Actual Cost Value policy.

This policy is for the house I currently rent out.  I plan to rent it out for at least the next 5 years.

The house is 118 years old, and is about 720 square feet.

So, which kind of policy should I have:  RCP or ACV?

Thanks in advance!

Do you have a mortgage on the house?  What would you plan to do with the property if you had a total loss?  Is the roof updated?  Siding updated?
Most people carry replacement cost, as it provides much better coverage than ACV.  Insuring at ACV will also put you into co-insurance penalty areas when you have a hail claim and need a new roof, so you'll have some out of pocket costs associated with it.  However, the premium savings might be worth it.

Did you have him quote it both ways?

Jack

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Re: Homeowner's Insurance: RCP or ACV confusion
« Reply #2 on: August 04, 2016, 10:43:08 AM »
How fancy is this house? A building that old could have flooring, trim, built-ins etc. made out of old-growth hardwood, which could be very expensive to replace (or indeed, irreplaceable). If that's the case, I would worry that even RCP coverage might try to low-ball the quality when paying for the alleged-replacement.

NinetyFour

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Re: Homeowner's Insurance: RCP or ACV confusion
« Reply #3 on: August 04, 2016, 03:28:12 PM »
It seems that my current homeowner's policy is a Replacement Cost Policy.  It has "inflation coverage".  The coverage goes up 4% each year.  The premium also goes up each year.

My agent told me that the alternative is an Actual Cost Value policy.

This policy is for the house I currently rent out.  I plan to rent it out for at least the next 5 years.

The house is 118 years old, and is about 720 square feet.

So, which kind of policy should I have:  RCP or ACV?

Thanks in advance!

Do you have a mortgage on the house?  What would you plan to do with the property if you had a total loss?  Is the roof updated?  Siding updated?
Most people carry replacement cost, as it provides much better coverage than ACV.  Insuring at ACV will also put you into co-insurance penalty areas when you have a hail claim and need a new roof, so you'll have some out of pocket costs associated with it.  However, the premium savings might be worth it.

Did you have him quote it both ways?

Great questions--thank you!

Yes, I do still have a mortgage on the house.

I should perhaps mention that I might sell the house in about 5 years.

If the house was a total loss, I would probably build again, but it would be something along the lines of a Tiny House.

The (shingle) roof is about 12 years old.

The siding--kind of depends on which side of the house you look at!  Three sides have been upgraded.  :)

No, I did not get quotes for both options.  I will do that.

Thanks!

NinetyFour

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Re: Homeowner's Insurance: RCP or ACV confusion
« Reply #4 on: August 04, 2016, 03:30:06 PM »
How fancy is this house? A building that old could have flooring, trim, built-ins etc. made out of old-growth hardwood, which could be very expensive to replace (or indeed, irreplaceable). If that's the case, I would worry that even RCP coverage might try to low-ball the quality when paying for the alleged-replacement.

It is not at all fancy.  Some of the flooring is the nice old wood (probably 118 years old), but that is just in one room.

Thanks for your comments.

TheInsuranceMan

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Re: Homeowner's Insurance: RCP or ACV confusion
« Reply #5 on: August 05, 2016, 10:50:51 AM »
It seems that my current homeowner's policy is a Replacement Cost Policy.  It has "inflation coverage".  The coverage goes up 4% each year.  The premium also goes up each year.

My agent told me that the alternative is an Actual Cost Value policy.

This policy is for the house I currently rent out.  I plan to rent it out for at least the next 5 years.

The house is 118 years old, and is about 720 square feet.

So, which kind of policy should I have:  RCP or ACV?

Thanks in advance!

Do you have a mortgage on the house?  What would you plan to do with the property if you had a total loss?  Is the roof updated?  Siding updated?
Most people carry replacement cost, as it provides much better coverage than ACV.  Insuring at ACV will also put you into co-insurance penalty areas when you have a hail claim and need a new roof, so you'll have some out of pocket costs associated with it.  However, the premium savings might be worth it.

Did you have him quote it both ways?

Great questions--thank you!

Yes, I do still have a mortgage on the house.

I should perhaps mention that I might sell the house in about 5 years.

If the house was a total loss, I would probably build again, but it would be something along the lines of a Tiny House.

The (shingle) roof is about 12 years old.

The siding--kind of depends on which side of the house you look at!  Three sides have been upgraded.  :)

No, I did not get quotes for both options.  I will do that.

Thanks!

I doubt your lien-holder will allow you to carry actual cash value on the property, as they have an insurable interest in it.  So, before you ultimately make any decision regards to the property coverage on this rental property, be sure to check with your lender to see if it's even allowed.  Or, if it is allowed, what is the minimum they'll allow you to place on it.  I'm sure they'll want to make sure there is enough coverage on the house to cover their interest (total current loaned dollars on the property)

NinetyFour

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Re: Homeowner's Insurance: RCP or ACV confusion
« Reply #6 on: August 05, 2016, 12:30:50 PM »
Got it.  Thanks again.