We had a house fire a few months ago. going through our 200+ page inventory, I’ve learned a lot about RCV vs ACV and all the nuances that go with it! Fortunately, we purchased replacement cost. We had a 60 inch TV that they said would cost $600.00 to replace with a $400.00 depreciation value. My question is this: If we were to purchase a better TV for say $800.00, how much would the insurance company pay? I wouldn’t expect them to pay $800.00 but would expect the full replacement cost of $600.00. That only seems fair to me. When we asked our insurance company (CSAA or AAA) about this, they said verbatim: “If you go over the replacement cost, we will only be reimbursing the amount of the recoverable depreciation that withheld for that item. It is your choice if you decide to upgrade an item and pay the difference.” If I’m reading that right, they will only pay the $400.00 depreciation amount? This doesn’t seem right to me. Is there precedent for this? Thanks so much!
Hi, thanks for your question and for reaching out to United Policyholders. Under a “replacement cost” policy, an insurer owes you the actual cost to replace the item, less depreciation . That depreciation is then recoverable when the item is actually replaced. So, if the tv you lost would cost $600 to replace, and they pay you ACV of $400, then upon replacement you would be entitled to up to $200 in “replacement cost benefits.” If you choose to buy a nicer tv, for $800, then you would still be entitled to the $200 that was held back, but nothing additional for the upgrade. They can’t specify that you buy the EXACT same item, and in many cases that specific item is not available anyhow. What you can’t do is use the RC benefits for your tv to buy a new bed and expect to collect what they held back, since it is a totally different item. Hope that clarifies the situation. If they persist, we recommend seeking assistance from your state Department of Insurance. https://www.uphelp.org/pubs/depreciation-basics has more information on this topic. Best, Sandy