RCV policies provide greater amounts for claim reimbursement. Insurance companies are required to take into account the possibility that you will need to “cash in” on those larger sums.
By requiring higher monthly premiums, they accomplish this. By increasing your deductible, you may be able to reduce your monthly premium.
In the event of a claim, insurance policies with coverage for actual cash value (ACV) or total insurable value (TIV) set caps or limits on the amount you can be reimbursed.
Monthly premiums are lower because the insurer loses less money if that occurs.
Some insurance companies cover the entire replacement cost, including sales tax, up front. Others will only pay a portion of the original cost up front, and then they will cover the remainder once you have purchased your replacement items within a predetermined amount of time.
Replacement cost value and actual cash value, a different valuation that insurers may use to determine coverage, differ significantly.
